Mortgage rates have moved up slightly, but maintain the one 1+ point price improvements over the past month. This low rate environment offers a window for existing owners to refinance and drop their monthly payment / eliminate mortgage insurance, and for potential buyers to increase their purchasing power and afford more home.
Give us a call at 805.543.LOAN with any questions.
Last Wednesday, the CBOE Volatility Index, a highly regarded measure of market volatility, reached its highest reading since November of 2011. Several times over the past week, investors sold off stocks en masse. Stocks would then veer higher the following day, only to dip back over some piece of unsettling news.
You might recall: late-2011 was a notably unstable time due to the “sovereign debt crisis” in Europe. Greece and Italy, for example, appeared ready to default on their debt obligations. Investors worried that sovereign default in the Eurozone would have harmful repercussions for the global economy.
Here we are in 2014, and global instability is again impacting U.S. stock markets:
- The European economy may be slipping back into recession. German industrial activity has dropped. The Greek stock market has plummeted.
- The geopolitical situation remains a mess, with unstable situations in Russia, Ukraine, and the Middle East (Syria, ISIS, etc).
- China’s economy appears to be slowing. What repercussions will this have for global demand?
With all of the uncertainty, is there cause for concern?
U.S. retail sales came dipped in September, but other data paints the picture of an economy that is in a steady cycle of growth. U.S. employment news continues to be positive: new jobless claims fell to their lowest level since 2000 last week. Construction activity increased in September.
Stock indexes hadn’t had a “correction” (defined as a dip of 10% or more) in three years, whereas corrections typically happen about once per year. Uncertainty might have given investors the nudge they needed to sell off into this “correction”. Put simply, the stock pullback was overdue. The volatility component comes in as investors attempt to buy at the bottom of the market and find undervalued purchases.
Volatility and uncertainty put downward pressure on mortgage rates.
Over the past three weeks, interest rate pricing has moved down by between 1 and 1.75 points. A “point” signifies one “percent” of the total loan amount. By dollar amount, an interest rate that costs 1 “point” on a loan of $400,000 would translate to $4,000.
Like anything you would purchase, mortgage rates have prices. The lower interest rates are “more expensive”, and buyers are charged more “points” to obtain them. To avoid the expense, buyers can accept a higher interest rate for a lower charge. The higher rates will often offer a “rebate” that the borrower can use to cover closing costs.
Is it better to accept short-term pain and pay “points” for a lower rate? Or accept a higher rate to help cover closing costs? If the owners intend on staying in the home for a long time, the lower interest rate could result in significant long-term savings.
Give us a call at 805.543.LOAN and we will break down the numbers and help you find the best solution for your unique situation.
The Savings Window
To give you an example of just how friendly such a significant price improvement can be to your wallet, consider the following scenario:
Joe Buyer is taking out a $400,000 home loan and elects to use the standard “Conventional” home loan with a 30-year fixed term. Joe Buyer wants to find the lowest possible rate to keep his monthly mortgage payments at a low, manageable level.
On September 24, the 4.000% 30-year fixed rate (4.162% APR) is expensive, and would have cost Joe Buyer 1.75% of the total loan amount: $7,000.
Nearly one month later (October 20), Joe Buyer can obtain the 4.000% 30-year fixed rate (4.015% APR) at a cost of zero points. The 1.75% price improvement offers a savings of $7,000!
The low rate environment offers an opportunity for buyers to increase their purchasing power and afford more home.
Existing owners also have an opportunity to refinance their mortgage into a lower rate. Any mortgage holder with mortgage insurance should also consider refinance to eliminate the costly MI payment.
Give us a call at 805.543.LOAN to discuss the possibilities! No commitment, no cost: just honest advice from the Mortgage Experts. 805.543.LOAN.
Mortgage rates continue to plummet. Over the past three weeks, check out these massive price improvements:
- Jumbo: -7/8 of a point
- 30-year Fixed (Conforming and High Balance): -1 and 1/2 points
- 15-year Fixed: -1 and 1/8 points
- Manufactured (Conventional and FHA): -2 and 1/2 points
- USDA, FHA, FHA 203k, VA: -2 and 3/4 points
As an example, the cost for a 4.000% 30-year fixed rate was 1.750 percent (1 and 3/4 points) on September 24. Today, that cost is just 0.250 percent (1/4 of a point). Lower rate costs help borrowers obtain lower mortgage rates for a lower cost, thus making home financing more affordable. Now is a great time to lock in a rate for purchase or refinance.
Rates have dropped for the following reasons:
- Concern that the European economy may be slipping back into recession.
- Concern about the geopolitical situation (Russia/Ukraine, Syria/Isis/Middle East).
- Concern about China’s slowing growth.
- Concern about the ebola outbreak (abroad and closer to home).
As of today, markets can add:
5. Concern over a drop in United States retail sales (lower GDP?). The Dow dropped 350 points in response.
Last Wednesday, the Federal Reserve released the minutes from their September meeting. Members displayed enough concern about the economy to lead to speculation that the Fed could hold interest rates low into 2016.
Concern, volatility, low interest rates, low inflation… these are all ingredients for low mortgage rates. When the future feels uncertain, investors look for safety, and the U.S. bond market is a prime place to find it. Demand for bonds helps put downward pressure on rates.
Give us a call at 805.543.LOAN with any questions.
On Tuesday, October 7, the Dow Jones Industrial Average dipped 274 points. The following day, it posted its largest jump of the year: 274 points. Next, the Dow retreated 334 points.
Talk about mixed messages.
All major U.S. stock indexes fell at least 2% last week, with the Nasdaq down 4%. The Dow is now even on the year. Despite Wednesday’s rally, it was the worst week for North American markets since 2012.
The volatility feels somewhat reminiscent to what we saw in 2011, when concern about the U.S. government shutdown, the “fiscal cliff”, and European debt issues dominated the headlines. This time around, however, the U.S. government is functioning (as best it can, at any rate) and U.S. employment data is strong.
The trouble, once gain, comes from abroad. Last week, an economic report showed that German industrial activity and exports had plummeted to 2009 levels. Meanwhile political unrest in Ukraine / Russia and the Middle East has people nervous.
So what can we expect moving forward?
Tune in from 9 a.m. to 11 a.m. to catch Mortgage Matters Radio on KVEC 920. No guest this week, but Dan and Jason will bring their unique charm to the table, as they update listeners on housing, real estate, and the economy.
Mortgage pricing continues to drop. Over the past two weeks, pricing is down by about 1.0 points in some cases. Buyers can now pay less for better mortgage rates. Now would be a good time to lock in a rate for purchase or refinance!
- Conventional Rates: 30-year fixed (-1/2 of a point), 15-year fixed (-1/8 of a point), and 30-year high balance (-1/2 of a point) all have cheaper pricing.
- Government Rates (FHA, USDA, VA): Down between 3/8 of a point and 1/2 of a point.
- Manufactured Rates: Down over 1/2 of a point.
Wondering if you should lock your rate? Every situation is different. Give us a call at 805.543.LOAN and we would be happy to talk it over.
Conventional Loan Programs
30-year fixed, 15-year fixed, 30-year high balance
Specialty Loan Programs
FHA, FHA 203k, USDA, VA
Manufactured Home Loan Programs
FHA Manufactured, Conventional Manufactured
Jumbo Loan Program
Jumbo ($700,000 loan amount)
Rates Directly to Your Inbox!
If you would like to receive a more detailed Mortgage Rate report, you can subscribe to our “CCL Rate Tracker.” The CCL Rate Tracker follows 10 loan programs and publishes three rate options closest to 1 point, par, and 1 rebate for each program every two weeks and delivers the results in an email. To sign up, please email [email protected] with the text “Rate Tracker.”
Apply Online Today!
When you register for a Loan Center account, you can submit a loan application online and the sensitive information that you provide will be transmitted securely. Your account also enables you to easily modify your loan application and view the status of your loan. Any questions? Call us at 805.543.LOAN or email us here.
About the Loan Programs:
- Mortgage rates assume purchase of a singe-family, detached, owner-occupied, residential property.
- Mortgage rates assume borrower credit score of 760 and a Debt-to-Income ratio of 35%. Rates for conventional loan programs assume a loan-to-value of 80%.
- Loan amount is $417,000 for all programs (appraised value of $522,000), except for the high balance ($561,200 loan and $722,000 value), and Jumbo ($700,000 loan and $1,000,000 value)
- Mortgage rates and APR subject to change.
Fannie Mae created their HomePath Mortgage program in 2009 to help sell the thousands of properties that they had come to possess through the foreclosure process.
The program’s expiration on October 7, 2014 is an informal sign that the housing market is well on its way back to normal.
When the housing bubble popped, hundreds of thousands of people lost their homes to foreclosure. As the largest housing insurer in the country, Fannie Mae came to possess many of those homes.
The HomePath mortgage offered a whole host of incentives to potential buyers. The program permitted as little as 3% (10% for investors) down with no private mortgage insurance requirement. To streamline the process, the HomePath loan did not require an appraisal (provided the buyer isn’t borrowing money for renovations).
The loan also took steps to help buyers compete against investors by prohibiting its agents from accepting offers from investors during the first 15 days of the home’s listing.
Buyers must have a fully executed purchase contract completed by October 7 to take advantage of the HomePath Mortgage, and the loan must fund and close by December 31, 2014.
Central Coast Lending is a California mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email us here to set up a free pre qualification. We are The Mortgage Experts: ask us anything!