Thursday, January 19, 2017

How a one-two, Trump-Yellen punch may move interest rates

How a one-two, Trump-Yellen punch may move interest rates









Sergey Lipinets, (blue gloves) from Moscow, Russia, during his IBF Junior Welterweight Bout against Lenny Zappavigna, (red gloves) from New South Wales, Australia, at the Galen Center at the University of Southern California on December 10, 2016 in Los Ang
Jayne Kamin-Oncea | Getty Images
Interest rates could try recent highs on the potent combination of a hawkish Janet Yellen and the pro-growth talk that is likely to come from Donald Trump in the next couple days.
Trump will be sworn in as 45th U.S. president on Friday, and the markets are looking for him to play up his pledges to push forward tax breaks and infrastructure spending early in his administration. He may also take actions in his first days that reduce regulation and define his commitment to the promises he's made voters. That could be seen as a near-term negative for Treasury prices and would send yields higher.
Already, bond yields were on the rise Thursday, lifted by surprising remarks from Fed Chair Yellen on Wednesday afternoon and economic reports Thursday morning showing decades-low jobless claims, an 11.3 percent jump in housing starts and a two-year high in mid-Atlantic manufacturing activity. Also a factor was the Wednesday report of a jump in headline consumer price index inflation to a more than two-year high of 2.1 percent year over year in December.
"I don't think we're going to see a huge surge in optimism again. We're not going to get another leg off of it, but I also don't think we're going to go back to where we were in October." -Tom Simons, money market economist, Jefferies
In her comments, Yellen said she expects a few rate hikes this year and that the fed funds target rate could get to 3 percent by 2019 — all in line with the Fed's forecasts. But it was Yellen's seemingly confident embrace of those targets that got the market's attention. Markets had been skeptical of the Fed forecast, and many economists had expected just two rate increases this year, not the three in the central bank's projection.
"She certainly gave the market a big push. Just looking at March probabilities, they went from an 18 percent chance (of a rate hike) to 25," said Aaron Kohli, rate strategist at BMO. "The market went from pricing slightly less than two hikes to slightly more than two hikes in 2017." He said expectations in the fed funds futures for a June rate rise went to 93 percent from 85 percent after Yellen spoke.
The 10-year Treasury yield also snapped to 2.43 percent after Yellen spoke and was as high as 2.48 percent Thursday, its highest level since Jan. 3. The two-year yield rose as well, but the curve flattened, meaning the gap between two-year yields and 10-year yields narrowed. The two-year was as high as 1.25 percent Thursday.
Yellen was scheduled to speak again and take questions Thursday evening at 8 p.m. ET at a Stanford University event. The Fed next meets Feb. 1 and while it is not expected to take action, the gathering could result in some more hawkish talk.
Kohli said the next target for the 10-year would be 2.52 percent, and then 2.60 percent.
"After the weekend and Monday, it's going to be very interesting. What happens when we get to brass tacks will be interesting for sure." -Tom Simons, money market economist, Jefferies
The bond market has been consolidating for the past several weeks after the 10-year reached a postelection high of 2.64 percent on Dec. 15. That is the level that could be tested in the near future, strategists say.
"There's a short base that will get even bolder if rates get to that level," Kohli said, adding short bets could add to the growing position sending rates higher. "I think it's very possible you get that kind of spike up. What I would suggest is as soon as that happens you might go the other way."
Money market economist Tom Simons at investment banking firm Jefferies said he doesn't see a big move in yields, but the bias should be toward higher yields, and lower prices. "I don't think we're going to see a huge surge in optimism again. We're not going to get another leg off of it, but I also don't think we're going to go back to where we were in October," he said.
"Next week we'll have two-, five- and seven-year auctions, a little bit of supply, and a light data week, so the focus is going to be on Trump, and for the most part, the first stuff that comes out of the gate is probably going to be (bond) market negative and it will be risk positive," he said.
Simons said he thought the rally in Treasurys, which drove the 10-year yield toward 2.30 percent earlier this week, was overdone.

In the last several weeks, yields fell as investors became disillusioned with the "Trump trade" and the prospects for quick adoption of the president-elect's pro-growth agenda.
Trump did talk up expectations for a tax program or stimulus when he met with the press last week, and that absence raised flags about what he will get done early in his administration. Trump's focus on repealing Obamacare and his comments on tariffs both were concerns for the market, since the issue of altering America's health-care system is seen as a quagmire, while tariffs could spark a trade war.
"After the weekend and Monday, it's going to be very interesting. What happens when we get to brass tacks will be interesting for sure," said Simons.
Kohli said he expects Trump to focus on infrastructure spending and tax cuts. He could make a bigger splash in markets if he announces fiscal spending that can be put to work right away. Tax reform and cuts are also important, but Kohli said that's likely months away.
Strategists expect Trump to push forward quickly on initiatives in his first weeks, and markets will be disappointed if he doesn't. "If he squanders it, that's his downside," said Kohli.

Robert Bobby Darvish Platinum Lending Solutions

Thursday, January 12, 2017

Average US 30-Year Mortgage Rate Falls to 4.12 Percent





Long-term US mortgage rates fell this week, the second week of declines after snapping a nine-week run of increases.
Mortgage buyer Freddie Mac said Thursday the rate on 30-year fixed-rate loans eased to an average 4.12 percent from 4.20 percent last week. That was still sharply higher than a 30-year rate that averaged 3.65 percent for all of 2016, the lowest level recorded from records going back to 1971. A year ago, the benchmark rate stood at 3.92 percent.
The average for a 15-year mortgage declined to 3.37 percent from 3.44 percent last week.
Mortgage rates surged in the weeks since the election of Donald Trump in early November. Investors in Treasury bonds bid yield rates higher because they believe the president-elect's plans for tax cuts and higher spending on roads, bridges and airports will drive up economic growth and inflation.
That would depress prices of long-term Treasury bonds because inflation would erode their value over time, a prospect that caused investors to demand higher yields.
In the latest week, a report from the government on employment in December pushed the price of the 10-year Treasury bond higher, dampening its yield. The Labor Department report issued last Friday showed that U.S. employers added 156,000 jobs last month, capping a year of slower but solid hiring.
Though the unemployment rate rose to 4.7 percent from a nine-year low of 4.6 percent, it did so for an encouraging reason: More people began looking for work. Because not all of them found jobs immediately, more people were counted as unemployed in December.
Bond yields move opposite to prices and influence long-term mortgage rates. The yield on the 10-year Treasury bond fell to 2.37 percent Wednesday from 2.44 percent a week earlier. That compares with 1.87 percent on Election Day Nov. 8. The yield declined further to 2.33 percent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged this week at 0.5 point. The fee on 15-year loans also remained at 0.5 point.
Rates on adjustable five-year loans fell to 3.23 percent from 3.33 percent. The fee increased to 0.5 point from 0.4 point.

Robert Bobby Darvish of Platinum Lending Solutions
 

Tuesday, December 20, 2016

Why you shouldn't panic about rising mortgage rates

Why you shouldn't panic about rising mortgage rates


Mortgage rates have been on a steady rise recently, but buyers shouldn't panic -- rates are still very low.

The average rate for a 30-year fixed-rate mortgage rose to 4.16%, up from 4.13% last week, according to Freddie Mac. A year ago, rates were sitting around 3.97%.

At the current interest rates, buyers will pay $21 more per month compared to a year ago, assuming a $241,000 price tag and 20% down payment.

"I don't think anyone welcomes higher interest rates, but it should not be a considerable deterrent to someone who really wants to buy a home," said Keith Gumbinger, vice president of HSH.com.
Rates under 5% have been the norm for a decade. "We still have quite a ways to go for rates to be even close to average," noted Len Kiefer, deputy chief economist for Freddie Mac.
In 1996, the average rate was 5.67%, and in 1990 it was 10.13%.
Related: Mnuchin wants U.S. to sell Fannie Mae, Freddie Mac stakes
Rising home prices, fueled by strong demand and tight inventory, have pinched buyers in recent years. Lower interest rates helped temper that rise, but as they move higher, borrowing becomes more costly and can reduce a buyer's budget.
"If rates remain at this level, some marginal buyers could be pushed out of the marketplace," said Gumbinger. "There could be less demand for properties on the margin, but I don't think there will be a huge change."
Kiefer said he expects home prices to continue to rise in 2017 year, but at a slower pace than we saw this year. "The supply is pretty low compared to demand and that will keep pressure on prices and rents."
The rate increases could be felt more by house hunters in the country's more expensive markets, like San Francisco and Manhattan.
"Affordability is already difficult in some markets," said Erin Lantz, vice president of mortgages for Zillow. "Rates can have more of an impact in those areas, but for most of the country, it's still very affordable, by historical standards"
Mortgage loan applications dropped 4% last week, according to the Mortgage Bankers Association.
Experts forecast rates will continue to gradually increase throughout 2017, particularly after the Federal Reserve increased a key interest rate on Wednesday for the second time in 10 years.
A higher Federal Funds rate makes it more expensive for banks to borrow money, which can lead to higher rates on credit cards and home loans.
Related: What a Fed rate hike means for you
"The era of ultra-low interest rates is over," said Lawrence Yun, chief economist of the National Association of Realtors, in a statement Wednesday. "[The] short-term rate hike will be followed by several additional rounds of increases in 2017 and 2018. Despite these moves, mortgage rates will not rise alarmingly."
The bond market also plays a role in mortgage rates. Interest rates on the U.S. government's 10-year Treasury note have been on a tear since Donald Trump was elected president. Treasury notes are a benchmark for many types of credit, including home loans.
Other factors -- like global economic uncertainty -- also affect U.S. mortgage rates.
"Global markets have sneezed and hiccupped and gone crazy at times and have driven down our interest rates," said Gumbinger.
For instance, after the Brexit vote in June, the rate on a 30-year fixed rate mortgage dropped to 3.48% -- the lowest level since May 2013.
As rates move higher, we could see the return of more home loan products, like adjustable rate mortgages.
"Non-traditional mortgage products could start to creep back into the market as consumers search for more affordable options," said Lantz.

Thursday, December 15, 2016

Mortgage Rates Move Higher

Mortgage Rates Move Higher


Mortgage Rates Move Higher
MCLEAN, VA--(Marketwired - Dec 15, 2016) - Freddie Mac ( OTCQB : FMCC ) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving higher for the seventh consecutive week.
News Facts
  • 30-year fixed-rate mortgage (FRM) averaged 4.16 percent with an average 0.5 point for the week ending December 15, 2016, up from last week when it averaged 4.13 percent. A year ago at this time, the 30-year FRM averaged 3.97 percent.

  • 15-year FRM this week averaged 3.37 percent with an average 0.5 point, up from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 3.22 percent.

  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.19 percent this week with an average 0.4 point, up from last week when it averaged 3.17 percent. A year ago, the 5-year ARM averaged 3.03 percent.

Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for the Definitions. Borrowers may still pay closing costs which are not included in the survey.
Quote
Attributed to Sean Becketti, chief economist, Freddie Mac.
"As was almost-universally expected, the FOMC closed the year with its one-and-only rate hike of 2016. The consensus of the committee points to more rate hikes in 2017. However, the experience of this year combined with the policy uncertainty that accompanies a new Administration suggests a wait-and-see outlook.
"This week's mortgage rate survey was completed prior to the FOMC announcement. The 30-year mortgage rate rose 3 basis points on the week to 4.16 percent. The MBA's Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases. If rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017."
Freddie Mac was established by Congress in 1970 to provide liquidity, stability and affordability to the nation's residential mortgage markets. Freddie Mac supports communities across the nation by providing mortgage capital to lenders. Today Freddie Mac is making home possible for one in four home borrowers and is the largest source of financing for multifamily housing.  Robert Bobby Darvish of Platinum Lending Solutions Orange County

Thursday, December 1, 2016

Mortgage rates reach highs not seen in more than a year

Mortgage rates reach highs not seen in more than a year

 
Mortgage rates sustained their upward march this week without any indication that their trajectory will slow anytime soon.
Home loan rates had been on the rise before the election. But since Donald Trump’s victory, they have been on a tear.
According to data released Thursday by Freddie Mac, the 30-year fixed-rate average climbed to 4.08 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) The rate was 4.03 percent a week ago and 3.93 percent a year ago. The 30-year fixed rate has now gone up more than half a percentage point in the past three weeks. It hasn’t been this high since mid-July 2015.
The 15-year fixed-rate average jumped to 3.34 percent with an average 0.5 point. It was 3.25 percent a week ago and 3.16 percent a year ago. The 15-year fixed is at its highest level since October 2014.
The five-year adjustable rate average rose to 3.15 percent with an average 0.4 point. It was 3.12 percent a week ago and 2.99 percent a year ago. The five-year ARM hasn’t been this high since late January 2014.
Many observers expect higher rates to endure because of recent strong economic data and the likelihood of a rate increase by the Federal Reserve later this month.
Bankrate.com, which puts out a weekly mortgage rate trend index, found that half of the experts it surveyed say rates will rise in the coming week. Elizabeth Rose, branch manager at Dallas-based Movement Mortgage, is one who says rates are headed higher.
“Expect continued volatility to put pressure on mortgage rates,” she said. “Mortgage bonds were in the process of attempting a recovery. However, some decent economic news the past few days have put a damper on those improvements.”

Higher rates have driven down mortgage applications, particularly those for refinances. According to the latest data from the Mortgage Bankers Association, the market composite index — a measure of total loan application volume — sank 9.4 percent from the previous week. The refinance index tumbled 16 percent, while the purchase index inched down 0.2 percent.
The refinance share of mortgage activity accounted for 55.1 percent of all applications.
“Mortgage application volume in the Thanksgiving week dropped sharply to the lowest level since early January, as mortgage rates increased to their highest point since July 2015,” said Mike Fratantoni, MBA chief economist. “Refinance volume, which is very sensitive to rates, dropped more than 16 percent in the most recent week, with refinances of government loans dropping 30 percent for the week. On a seasonally adjusted basis, purchase volume was little changed last week.  However, the mix continues to shift towards higher balance loans, as the average purchase loan size reached a new survey record.  First-time buyers and buyers of lower priced units may have stepped away from the market to some extent given the jump in rates. It appears that many homebuyers rushed to get their applications two weeks ago as rates began to increase.”

Sunday, November 6, 2016

Mortgage Rates Inch Up; Solid Jobs Report Is Consistent With a December Rate Rise

Mortgage rates inched ahead on Friday; meanwhile, 161,000 jobs added in October and advancing hourly wages are consistent with a December rate rise from the Fed.

Nov 4, 2016 at 2:19PM
House For Sale
IMAGE SOURCE: PIXABAY.
Mortgage rates inched up on Friday: The average 30-year mortgage rate is 3.49%, which equates to a $448.49 monthly payment per $100,000 borrowed. A month ago, the equivalent payment would have been lower by $7.22.
If you opt for a shorter term, the average 15-year mortgage rate is 2.74%, which equates to a $678.15 monthly payment per $100,000 borrowed. A month ago, the equivalent payment would have been lower by $5.22.
Rate (national average)
Today
1 Month Ago
30-year fixed jumbo
4.13%
4.35%
30-year fixed
3.49%
3.36%
15-year fixed
2.74%
2.63%
30-year fixed refi
3.52%
3.41%
15-year fixed refi
2.77%
2.65%
5/1 ARM
3.04%
2.92%
5/1 ARM refi
3.17%
3.02%
5/1 ARM = ADJUSTABLE-RATE MORTGAGE WITH AN INITIAL FIXED FIVE-YEAR INTEREST RATE. DATA SOURCE: BLOOMBERG.

Strong October jobs report sets up a December rate hike, but expect rate rises to be gradual

The employment situation report for the month of October was well-received on Friday. The addition of 161,000 jobs to nonfarm payrolls was within Bloomberg's range of estimates of 155,000 to 200,000. That figure was bolstered with upward revisions for August and September totaling 44,000. The unemployment rate fell to 4.9% in October, from 5%, in line with the consensus estimate. Most noteworthy, perhaps, were average hourly earnings, which rose by 0.4%, above the 0.2% to 0.3% range of estimates.
Despite these results, the market-implied probability of a December interest-rate rise fell from 78% to 74% on Friday, according to data from Bloomberg. The probabilities are derived from prices in the federal funds futures market.
Speaking at the 2016 Realtors Conference and Expo this morning, Federal Reserve Bank of Atlanta president Dennis Lockhart said of this morning's report, "the top-line numbers look solid." He went on to say:
I anticipate a very gradually rising interest rate environment over the next two years. ... And when the rate environment does reach steady state, mortgage rates should still be low and affordable by historical standards.
Mr. Lockhart is not a member of the Fed's interest rate-setting committee.
The interest-rate cycle is turning, but the turn will likely be very gradual, which is good news for prospective homebuyers.
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Sunday, October 23, 2016

Mortgage Rates Just Hit a 4-Month High

It’s returning to pre-Brexit levels.

Interest rates on U.S. 30-year mortgages rose to their highest levels in four months in line with rising Treasury yields on a bond market sell-off spurred by speculation about reduced stimulus from global central banks, mortgage finance agencyFreddie Mac said on Thursday.
The average 30-year mortgage rate was 3.52% in the week ended Oct. 20, Freddie Mac said in its latest mortgage rate survey. This was the highest level since the 3.56% recorded in the week of June 23.
“This is the first week in over four months that rates have risen above 3.50%. This month, mortgage rates seem to be catching up to Treasury yields and returning to pre-Brexit levels,” Sean Becketti, Freddie Mac’s chief economist, said in a statement.
Benchmark 10-year Treasury yields were at 1.74% early on Thursday, down more than 1 basis point (a tenth of a percentage point) on the day. On Monday, it reached 1.81%, which was its highest since June 2, Reuters data showed.