John Sauro
Email: johnsauro@gmail.com
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U.S. stock-index futures fell sharply Sunday night following the Federal Reserve’s emergency decision to slash interest rates nearly to zero and buy $700 billion in Treasurys and mortgage-backed securities in an effort to quell financial market turmoil sparked by the global coronavirus pandemic.
The benchmark federal fund rate is now at a range of 0 to 0.25 percent, down from a range of 1 to 1.25 percent. The cut essentially brings the nation’s interest rate to zero — something that President Trump has repeatedly pressed for over the past year.
“The Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals,” the Fed said in its Sunday evening statement.
The Fed also said that it will buy at least $500 billion in Treasury securities and $200 billion in mortgage-backed securities over the coming months, a program known as “quantitative easing.”
This may or may not be good for mortgage rates. Contrary to popular belief, historically Fed Rate Curts result in Mortgage rates rising.
Weather ot not the Fed buying $500 billion in Treasury Securities and $200 billion in Mortgage Backed Securities brings Mortgage Rates lower is to be seen. There are many other factors that are in play, such as convesity buying, oil and heavy institutional borrowing on banks.
Stay tuned for another wild ride in the markets.
You can contact John Sauro for more information and consultation.
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Source: John Sauro President North Atlantic Mortgage Corp. & Fox News
Homeowners rushed to take advantage of the sharp drop in interest rates last week.
Refinance demand pushed mortgage application volume up 5% for the week to the highest level since 2013, according to the Mortgage Bankers Association’s seasonally adjusted index. Purchase demand, however, dropped.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.71% from 3.81%, with points remaining unchanged at 0.28 (including the origination fee) for loans with a 20% down payment. That is the lowest level since October 2016. The rate was 98 basis points higher one year ago.
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John Sauro
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“The 10-year Treasury yield fell around 20 basis points over the course of last week, driven mainly by growing concerns over a likely slowdown in Chinese economic growth from the spread of the coronavirus. This drove mortgage rates lower, with the 30-year fixed rate decreasing for the fifth time in six weeks,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Refinance applications, which are most sensitive to weekly rate moves, jumped 15% for the week and were 183% higher than a year ago. Demand hit the highest level since June 2013. The average loan amount also spiked, as homeowners with jumbo loans have more to gain from weekly rate declines. The refinance share of mortgage activity increased to 64.5% of total applications from 60.4% the previous week.
Mortgage applications to purchase a home decreased 10% from one week earlier, but were 11% higher annually. Today’s buyers are facing a tight and increasingly pricey housing market. The supply of homes for sale fell to a record low at the end of last year, and price gains, which had been easing a bit, have reaccelerated again.
“Prospective buyers weren’t as responsive to the decline in mortgage rates — likely because of suppressed supply levels,” Kan said. “Purchase applications took a step back, but still remained 7.7% higher than a year ago.”
John Sauro
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Mortgage rates have been falling on fears over the coronavirus hitting financial markets. Rates, however, finally turned slightly higher Tuesday, as the stock market bounced higher.
“The bigger issue is merely the risk that today [Tuesday] marks some sort of turning point in the bigger picture,” said Matthew Graham, chief operating officer of Mortgage News Daily. “It’s too soon to know if that’s what this is, but it’s definitely the first obvious candidate since the coronavirus rate-drop began.
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-Source: CNBC
The average rate on the 30-year fixed mortgage fell to the lowest level since October this week, at 3.69%, according to Mortgage News Daily. That has an already competitive housing market heating up even more.
Open houses, which are usually pretty rare the first week in January, were plentiful in markets across the nation this year, as buyers hope to get in before the competition gets even worse.
Buyer sentiment in the housing market remained high in December, according to a monthly survey from Fannie Mae — the Home Purchase Sentiment Index. In general, Americans said they did not expect mortgage rates to go up, and they expressed increasing confidence in both their household incomes as well as their employment.
The average rate on the 30-year fixed mortgage fell to the lowest level since October this week, at 3.69%, according to Mortgage News Daily. That has an already competitive housing market heating up even more.
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John Sauro
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Open houses, which are usually pretty rare the first week in January, were plentiful in markets across the nation this year, as buyers hope to get in before the competition gets even worse.
Buyer sentiment in the housing market remained high in December, according to a monthly survey from Fannie Mae — the Home Purchase Sentiment Index. In general, Americans said they did not expect mortgage rates to go up, and they expressed increasing confidence in both their household incomes as well as their employment.
“The continued strength in the HPSI attests to the intention among consumers to purchase homes. This is consistent with the Fannie Mae forecast for 2020,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.
“The HPSI hit and remained near an all-time high in 2019, driven by the 16-percentage point year-over-year increase in the share of consumers believing it is a good time to buy.”
Home prices are also reflecting the increasing demand for housing. Prices nationally rose 3.7% annually in November, a new report from CoreLogic said. That is the largest annual gain since last February.
“The latest U.S. index shows that the slowdown in home prices we saw in early 2019 ended by late summer,” said Frank Nothaft, chief economist at CoreLogic. “The decline in mortgage rates, down more than one percentage point for fixed-rate loans from November 2018, has supported a rise in sales activity and home prices.”
Lower mortgage rates and higher competition were top of mind among home shoppers at one of the first Sunday open houses of the year in the Atlanta area. The fully renovated three-bedroom, two-bathroom home in Smyrna was listed at $335,000, and saw plenty of interest from both occupant buyers as well as rental investors.
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John Sauro
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“With the market value the way it is right now, there’s a lot of people jumping on the same kind of real estate that I’m looking to invest in,” said Michael Tarpley, who owns his own home nearby but is looking for an income property.
Ivette and Arturo Barajas are also looking for an investment home and have been at it for about six months. They have been watching mortgage rates very closely.
“Right now they’re a bit lower than they usually are, so it’s definitely a time to take advantage of that,” said Ivette. “Any time you can keep those rates lower, that’s the time to go for it.”
Cynthia Eunice is looking to buy a home for herself. She said she’s seen a lot of newly built homes in the Atlanta area, but they tend to be pricier, and she wants an older home with character. Unfortunately, it’s been hard to find.
“When I saw the open house, I just jumped at it,” Eunice said of the small Smyrna home. “There is a lot of competition in my price range. You have to jump on it. Things are going really quick.”
The real estate agent for the home, Melissa Fuentes, said 34 people went through the home in the two-hour open house Sunday, and she is doing two second showings on Tuesday. She expects an offer this week.
John Sauro
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-Source:CNBC
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Source: KCM
Despite the economic slowdown due to weakening manufacturing and corporate investment, the consumer side of the economy remains on solid ground. The fifty-year low in the unemployment rate combined with low mortgage rates has led to increased homebuyer demand this year. Much of this strength is coming from entry-level buyers – the first-time homebuyer share of the loans Freddie Mac purchased in 2019 is forty-six percent, a two-decade high.
John Sauro, President
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Source: Freddie Mac
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John Sauro, President
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Home prices are still gaining nationally, but not nearly as much as they have been over the past few years.
Prices in June rose 3.1% annually, according to the S&P CoreLogic Case-Shiller national home price index. That’s down from 3.3% annual gain in May.
The 10-City Composite annual increase came in at 1.8%, down from 2.2% in May. The 20-City Composite rose 2.1% annually, down from 2.4% in the previous month.
“Home price gains continue to trend down, but may be leveling off to a sustainable level,” S&P Dow Jones Indices’ Philip Murphy said in a release. “Fewer cities (12) experienced lower YOY price gains than in May (13).
Phoenix, Las Vegas and Tampa reported the highest annual gains among the 20 cities. In June, Phoenix saw a 5.8% annual price increase, followed by Las Vegas with a 5.5% increase and Tampa with a 4.7% increase. Six of the 20 cities reported greater price increases in the year that ended in June versus the year that ended in May. Seattle was the only city to show prices down (1.3%) from June 2018.
Home prices will likely get a boost from the significant, continuing drop in mortgage rates that began in the spring. The average rate on the 30-year fixed mortgage is now a full percentage point lower than it was a year ago. Lower mortgage rates give consumers more buying power and tend to push home prices higher.
“The U.S. National Home Price NSA Index YOY price change in June 2019 of 3.1% is exactly half of what it was in June 2018,” said Murphy, managing director and global head of Index Governance at S&P Dow Jones Indices. “While housing has clearly cooled off from 2018, home price gains in most cities remain positive in low single digits. Therefore, it is likely that current rates of change will generally be sustained barring an economic downturn.”
Another read showed home prices in the second quarter of this year up 5% from a year earlier. The measure, from the Federal Housing Finance Agency, looks at prices on homes with loans backed by Fannie Mae and Freddie Mac, which are conforming loans. It therefore does not capture the high end of the market. It shows home price gains decelerating for the fifth straight quarter, but also notes that may be about to change.
“We expect some positive effect of the mortgage interest rate decline on housing demand as well as home price appreciation given that rates have fallen a full percentage point since the end of 2018 to below 4% in August,” Lynn Fisher, FHFA’s senior advisor for economics, said in the release. “This should lead to a longer summer buying season and potentially a higher rate of appreciation on a seasonally adjusted basis than would have previously been expected in the third quarter.”
Source: CNBC
The gap between ARMs and fixed-rate loans is now really small because of the inverted yield curve. It is a rare scenario where long-term interest rates suddenly fall below short-term interest rates. ARM rates are kind of all over the place lender to lender because they are a very small percentage of new loan originations today, around 6% of total mortgage application volume, according to the Mortgage Bankers Association.
John Sauro, President
The inverted yield curve isn’t just spooking people over a possible recession – it’s doing weird things to mortgage rates, too.
Traditionally, adjustable-rate mortgages, or ARMs, offer lower interest rates than fixed-rate loans, because they are slightly riskier, and borrowers don’t want to pay more for more risk. ARMs can carry a fixed rate for five, seven or 10 years, and most today require some principal payment as well. No matter what the length of the fixed-rate term, they are all amortized over 30 years, so the payments will be relatively comparable to fixed-rate loans.
It is therefore very odd to suddenly see ARMs showing higher interest rates than the traditional 30-year fixed, which is what Bankrate.com is currently showing for average purchase mortgage rates. Refinance rates are still lower for ARMs.
So what’s going on? First, ARM rates are all over the place lender to lender because they are a very small percentage of new loan originations today, around 6% of total mortgage application volume, according to the Mortgage Bankers Association.
“The averages you see on the site are based on what quotes have been posted to the site, so small and inconsistent sample size on the ARMs,” said Greg McBride, chief financial analyst at Bankrate.com. “Our weekly national survey on the other hand, does show what we’d expect to see – ARM rates lower than fixed. The gap isn’t big of course, as we’ve got a flat to inverted yield curve, but the traditional relationship holds.”
And that’s precisely what is so interesting — that flat to inverted yield curve. The gap between ARMs and fixed-rate loans is now really small because of the inverted yield curve, which, without getting too technical, is a rare scenario where long-term interest rates suddenly fall below short-term interest rates. In the past, an inverted yield curve has signaled an impending recession.
“Longer-term rates (like the 30-year mortgage) are now equal to or lower than one-year rates (like the indexes used with most ARMs),” explained Guy Cecala, publisher and CEO of Inside Mortgage Finance. “Bad time to get an ARM.”
Of course we are looking at averages here, and every borrower has a different financial scenario – credit score, net worth, loan down payment, etc. – and will therefore be offered a different rate. And of course rates vary depending on the lender, especially when it comes to ARMs.
“Rates are all over the place. Some lenders want/need the variable cash flows to offset fixed-rate exposure,” said Matthew Graham, chief operating officer of Mortgage News Daily. “People want variable rates at the beginning of a Fed rate-cutting cycle, and lenders generally would prefer fixed rates of return when rates are declining.”
Source: CNBC
| Many home buyers may be expecting lower mortgage rates in the wake of the Federal Reserve’s decision on Wednesday, July 31, to reduce their benchmark federal-funds rate, the first easing of monetary policy in over ten years. Because it was so widely expected, the Fed’s move was already reflected in mortgage rates. That is, the cut in the short-term rate was already “priced into” mortgage yields by the time it came. The key point to remember: Although mortgage rate changes can be volatile, they move in response to shifting market conditions and in anticipation of Fed policy. They do not change in reaction to a Fed policy change that was widely expected. The great news is that mortgage rates are the lowest we’ve seen in two years. They’ve fallen dramatically over the past eight months – from an average of 4.87% in November to a 3.77% average in July. In the week ending August 1, the industry average was 3.75%. Consider the impact of this decline on a monthly payment. For the 30-year fixed-rate mortgage, the decline from November’s 4.87% to July’s 3.77% reduces the monthly principal and interest payment by $65 for every $100,000 borrowed, a savings of over $23,000 over the term of the loan. |
John Sauro, President
______________________________________________________________________________Home appreciation slowing While mortgage rates have been falling, home prices increases have been decelerating. The most recent reading of a popular home price gauge shows a 5.1% increase over the past twelve months. A year ago, home prices were rising at a 7.4% rate.
Home sales cooling off Meanwhile, housing sales are slowing. The number shows a 5.1% increase over the past twelve months. A year ago, home prices were rising at a 7.4% rate.
Bottom line: This is a great time to buy! Low mortgage rates .and a more balanced housing market are helping with affordability, so if you’ve been waiting to buy a house, now may be a great time to act. . . Source: CNBC
The Federal Reserve’s decision to cut interest rates 25 basis points for the first time in over a decade marked a dramatic shift in monetary policy.
It will be felt by Americans across the board.
After raising the federal funds rate nine times in three years, with the last move coming in December as financial markets were melting down, concerns about a slowing economy caused the Federal Open Market Committee and ChairmanJerome Powell to reverse course.
Now, interest rates are historically low, which leaves the central bank with little wiggle room in the event of a recession or if the economy stumbles. The current target range for its overnight lending rate is 2% to 2.25%.
For consumers, the so-called Powell Pivot could mean a reprieve in escalating borrowing costs, which can impact your mortgage, home equity loan, credit card, student loan tab and car payment. At the same time, savings account rates may fall.
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John Sauro, President
North Atlantic Mortgage Corp.
Email: johnsauro@gmail.com
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Here’s a breakdown of what may happen to your loans and savings:
Most credit cards come with a variable rate, which means there’s a direct connection to the Fed’s benchmark rate.
With a rate cut, the prime rate lowers, too, and credit cards likely will follow suit. For cardholders, that means they could see that reduction in their annual percentage yield, or APR, within a billing cycle or two.
On the heels of the previous rate hikes, credit card rates now stand at a record high of 17.85%, on average, according to Bankrate.com.
Almost half of all cardholders do not pay their credit card bill in full each month and, as a result, the average household with credit card debt pays over $1,150 a year in interest, according to a report by NerdWallet.
Considering that the average household currently owes $8,390, credit card users would save roughly $1.5 billion in interest as a result of a quarter-point rate cut, a separate report by WalletHub found.
However, that may result in little benefit per cardholder with APR’s still near record highs. For example, a customer with a credit card balance of $1,400 at a 14.4% rate would only see their financing charge decrease by about 30 cents each month, according to Mike Kinane, the head of U.S. Bankcards at TD Bank.
Better yet, shop around for a zero-interest balance transfer offer and aggressively pay down your credit card debt “without the headwind of interest costs,” advised Greg McBride, the chief financial analyst at Bankrate.
At any time, cardholders to can also reach out to their issuer directly to request a break on interest rates.
Only recently have savers started to benefit from higher deposit rates — the annual percentage yield banks pay consumers on their money — after those rates hovered near rock bottom for years.
Since the central bank raised the federal funds rate nine times in three years, the highest yielding rates are now paying over 2.5%, up from 0.1%, on average, before the Fed started increasing its benchmark rate in 2015. One online bank — Green Dot — recently introduced the highest yielding bank account in the industry at 3%.
With an annual percentage yield of 3%, a $10,000 deposit earns $300 after one year. At 0.1%, it earns just $10.
“Savers are in a position now where they can earn more on their savings than the rate of inflation,” McBride said.
After the rate cut, those deposit rates will come down to some extent. Some already have.
“The only real losers in all of this are people with online-only savings accounts, whose yields we expect to drop by around 11 basis points,” said WalletHub CEO Odysseas Papadimitriou.
Yet online banks are still able to offer higher-yielding accounts because they come with fewer overhead expenses than traditional bank accounts and savers can snag significantly higher savings rates by shopping around.
Alternatively, consumers can lock in an even higher rate with a 1-, 3- or 5-yearcertificate of deposit (top yielding rates average 2.6%, 2.75% and 3%, respectively) although that money isn’t as accessible as it is in a savings account and, for that reason, does not work well as an emergency fund.
The economy, the Fed and inflation all have some influence over long-term fixed mortgage rates, which generally are pegged to yields on U.S. Treasury notes.
As a result, mortgage rates are already substantially lower since the end of last year.
The average 30-year fixed rate is now about 3.93%, the lowest since November 2016, according to Bankrate.
That means that if you bought a house in the last few years, considerrefinancing at a lower rate, McBride advised. If you can shave half a percentage point off your rate, that would save the average homeowner $125 a month, he said.
On the heels of the Fed decision, this represents the single greatest saving opportunity for consumers, McBride added.
Many homeowners with adjustable-rate mortgages, which are pegged to a variety of indexes such as the prime rate, LIBOR or the 11th District Cost of Funds, may see their interest rate go down as well, although not immediately as ARMs generally reset just once a year.
The Fed’s first rate cut in over a decade will also make it slightly cheaper for consumers to borrow money from a home equity line of credit or pay back their current HELOC loan. Unlike an ARM, HELOCs could adjust within 60 days so borrowers will benefit from smaller monthly payments within a billing cycle or two.
However, the savings may end up being only a few dollars a month, according to Holden Lewis, NerdWallet’s home expert.
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I just refinanced with North Atlantic Mtg and my experience was a easy smooth transaction. They were on top of every detail and they were able to secure the best rate and offer me the best options available. I would absolutely refinance my loan again with North Atlantic
J. Abolafia White Plains NY
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For those planning on purchasing a new car, the Fed decision likely will not have any big material effect on what you pay. For example, a quarter-point difference on a $25,000 loan is $3 a month, according to Bankrate.
“That’s not going to translate into any notable difference for would-be car buyers,” McBride said.
Auto loan rates are still relatively low, even after years of rate hikes. Currently, the average five-year new car loan rate is 4.72%, up from 4.34% when the Fed started boosting rates, while the average four-year used car loan rate is 5.41%, up from 5.26% over the same time period, according to Bankrate.
But the rate cut also lowers financing costs for car manufacturers and dealers as well. That means “you can be a little bit more aggressive in your negotiations,” said Tendayi Kapfidze, the chief economist at LendingTree, an online loan marketplace.
“You might be able to negotiate a cheaper price on the actual car,” he said.
While most student borrowers rely on federal student loans, which are fixed rate, more than 1.4 million students a year use private student loans to bridge the gap between the cost of college and their financial aid and savings.
Private loans may be fixed or may have a variable rate tied to the Libor, prime or T-bill rates, which means that when the Fed cuts rates, borrowers will likely pay less in interest, although how much less will vary by the benchmark.
If you have a mix of federal and private loans, consider prioritizing paying off your private loans first or refinance your private loans to lock in a lower fixed rate, if possible.
(A college education is now the second-largest expense an individual is likely to incur in a lifetime — right after purchasing a home. The average graduate leaves school $30,000 in the red, up from $10,000 in the early 1990s.)
Source: CNBC
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