Many rush to get their loan application in before their income changes.
With the sudden dramatic drop in rates and paychecks taking a hit, it is advised to quickly submit your loan request. It costs nothing, no commitment necessary and if you choose not to go ahead with it there is no adversary effects on your financial situation.
If you don’t make a move now, qualifying for that great rate may not happen if your income shows a decline.
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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
The Fed cut rates this week by .50% due to the concerns that the Carona Virus will damage the current vibrant economy. Contrary to the media hype, historically mortgage rates can actually rise and they did the day after the rate cut.
That’s because mortgage rates are not directly affected by a fed rate cut.
Rather mortgage rates are directly affected by the prices of mortgage bonds, known as the Mortgage Backed Securities Market. Specifically the Fannie mae and Freddie mac bonds. Not the 10 year treasury, as many would have you believe. The 10 year Treasury affects the commercial mortgage backed securities market used for commercial real estate loans, not home loans. Glad I could clear that up.
Mortgage rates dropped because of the stock market turmoil. When the stock market drops, investors move their stock investments into the bond market this is known as “Flight to Quality”.
Flight to quality is the action of investors moving their capital away from riskier investments to safer ones. Uncertainty in the financial or international markets usually causes this herd-like shift.
Therefore the Price of the bond rises and inversely the rates tied to those bonds drops.
Below is a chart of the Mortgage backed Securities Market showing the rise in bond prices from January 16th to march 6th. An increase of 133 basis points, which results in approximately 50% reduction in mortgage rates.
Once the fears and media hype about the Carona virus subsides, as did with the Swine Flu H1N1 Pandemic in 2009, the financial markets should recover. Especially with the current strong economy and its anybody’s guess when that will happen.
So I don’t recommend trying to time the bottom on mortgage rates.
Rates are historically very low. many today were not around in 1992, when mortgage rates first fell from their highs of 17% to below 10%. Yes that’s true, look it up. Also rates tend to move up faster than they go down, as banks are not eager to pass the saving on to their customers.
My advice; Connect with a experienced Mortgage Professional, typically found not in the banks, but in the mortgage Broker/Lender community.
These professionals specialize only in lending and have access to many different loan programs. I’m going to toot my own horn here.
I have been in the Lending profession since 1991 and seen it all. Many of clients have done multiple loans with me over the years. Take a moment to see what my clients have to say.
Contact me for a Complimentary Consultation and see how much you can save. I’m an analyst, not a salesman. If I can’t save you money on your refinance or home loan purchase no harm, no foul.
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John Sauro
Sources: Written by John Sauro North Atlantic Mortgage, Chart MBS Pro.
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The possibility of a Fed Rate cut to stabilize the markets may move mortgage rates higher not lower.
Right now rates are at a 4 year low, due to a flight to quality, as fears of the Carona Virus continue to weigh on the markets.
“When money flows out of stocks and into Bonds, the price of Bonds rise, while inversely the Bonds rates drop, making mortgage rates more attractive.” says John Sauro of North Atlantic Mortgage.
Contact me for a quick analysis today!
John Sauro
Direct Line: 1-914-764-3261
Residential Home Loans & Commercial Real Estate Lending.
The Federal Reserve May Need to Step in COVID-19 poses downside risk to the U.S. economy, and though there are limits to monetary policy, the Federal Reserve may need eventually to step in. An emergency rate cut is unlikely, as these are rare. The most likely outcome is that the Fed continues to wait and see how financial market conditions fare and whether the coronavirus is having significant direct or indirect impacts on the U.S. economy. However, we are not ruling out that the Fed could act. Investor sentiment needs a boost, and normally investors turn to the Fed, anticipating a “Powell put.” The term “Powell put” isn’t as ubiquitous as either the Yellen, Bernanke or Greenspan puts. The idea of a Fed put garnered attention in the 1980s and 1990s under former Fed Chairman Alan Greenspan. Setting a floor Derived from the concept of a put option, these terms refer to central bank policies that effectively set a floor for equity valuations. Fed Chairman Jerome Powell seems less sensitive to stock prices than some former chairs, but he recognizes that a substantial decline in equity markets could alter the outlook for the U.S. economy. So, a Powell put exists, but equity prices likely have not fallen enough to trigger it. The Fed likely viewed the stock market as being a little frothy—we agree.
We constructed several valuation metrics and compared them with actual stock prices. Each metric is constructed as the fitted values from a linear regression of stock prices on a proxy of fundamental value, including GDP, corporate earnings, and discounted free cash flow, measures that capture earnings and interest rates.
All these metrics showed that the stock market was overvalued. While the selloff in the stock market may not worry the Fed, credit markets could. The Fed can stop credit markets from freezing up; and that is one way to protect the economy. The Fed’s objective would be to prevent a supply-side shock, like coronavirus, from spilling over into the demand side of the economy.
We are watching high-yield corporate bond spreads, which are widening, but it will have to continue before it sounds alarms at the Fed. Odds on the FOMC We will be revisiting our subjective odds of a rate cut for the rest of this year’s Federal Open Market Committee meetings. While monetary policy has its limits and cannot cure the coronavirus, the Fed is not powerless. If financial market conditions continue to tighten, odds of a rate cut will increase. The Fed has shown that it will respond more quickly to an inversion in the yield curve, and a rate cut could help bolster investor sentiment. It may not cure all that troubles in financial markets, but it could help. Still, we believe the key is not equity but rather credit markets.
Making sure credit markets don’t freeze is critical. The impact of the coronavirus on U.S. GDP will be less than in China. The hit to the U.S. economy will come via reduced US goods exports to China, less spending in the U.S. by Chinese tourists, and a drop in domestic production because of supply chain disruptions. We expect this drag on the U.S. economy to be 0.45 percentage point on first-quarter GDP growth, but this is likely a little optimistic, particularly given the supply chain impact and evidence the virus has spread beyond China.
The U.S. economy will experience growth of only 1.3% in the first quarter (annualized), down by 0.6 percentage point because of the virus. Growth in 2020 is now expected to be 1.7%, down 0.2 percentage point. The U.S. economy’s potential growth is estimated at near 2%. Our previous assumption that the virus will be contained to China proved optimistic, and the odds of a pandemic are rising. We previously put the odds of a pandemic at 20% (see our Alternative Scenario), but we now put them at 40%. A pandemic will result in global and U.S. recessions during the first half of this year. The economy was already fragile before the outbreak and vulnerable to anything that did not stick to script. COVID-19 is way off script. COVID-19 came out of nowhere. It may be what economists call a black swan—a rare and inherently unforeseeable event with severe consequences.
Source: Moodys
In late December, the House passed a bill, the Restoring Tax Fairness for States and Localities Act (H.R.5377), that would temporarily remove the SALT (state and local tax) deduction cap, if approved by the Senate. Before the Tax Cuts and Jobs Act, enacted in 2017, homeowners could deduct any amount paid toward state income taxes, local income taxes and property taxes. Due to the revamped tax law, however, the SALT deduction has been capped at $10,000 per return, or $5,000 for those married but filing separate.
John Sauro
The new bill would increase the SALT cap from $10,000 to $20,000 for those filing joint returns in 2019, and would eliminate the cap for the 2020 and 2021 filing years. Support of the cap has been controversial, with some lawmakers believing the deduction largely supports the wealthy, providing an unfair advantage. Others, however, believe the average earner with even a modest home can be negatively affected by the cap, as homes in states with higher property taxes can quickly expend the entire $10,000 SALT limit.
The 30-year rate fell to 3.45%, which could boost housing market as spring approaches, according to TRD
Mortgage rates have hit their lowest level in more than three years, which could provide a boost to the country’s housing market heading into spring.
The 30-year fixed-rate average fell to 3.45 percent, according to the Wall Street Journal, citing data released Thursday by Freddie Mac. That’s down from 3.51 percent the week before and 4.41 percent at this time last year. The average rate for a 15-year mortgage also dropped to a three-year low at 2.97 percent. In June, it stood at 3.28 percent.
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But home prices nationwide have skyrocketed in recent years, so the lower mortgage rates might not be enough to enable owners to buy their first homes. They also reflect concerns about the global economy.
Low mortgage rates did help push home sales to a yearly high mark in December, when the country saw 5.54 million home sales for a 3.6 percent increase from November. The lower rates have also spurred several refinancings, with the volume of applications increasing by 15 percent from the prior week to hit their highest mark since June 2013, according to recent data from the Mortgage Bankers Association.
Fannie Mae chief economist Doug Duncan told the Journal that the low mortgage rates could be good for existing and prospective homeowners.
“It’s very much a historical opportunity for folks who have an existing mortgage to refinance and for credit-qualified people to lock in a low rate,” he said. [WSJ] — Eddie Small
…read more
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
Freddie Mac will release its Primary Mortgage Market Survey on Thursday, February 6, after the latest report revealed a continued drop in rates.
The average 30-year fixed-rate mortgage fell nine basis points on Thursday to an average rate of 3.51%, according to Freddie Mac’s Primary Mortgage Market Survey.
“This week’s mortgage rates were the second-lowest in three years, supporting homebuyer demand and leading to higher refinancing activity,” said Sam Khater, Freddie Mac’s Chief Economist.
“Borrowers who take advantage of these low rates can improve their cash flow by lowering their monthly mortgage payments, giving them more money to spend or save.”
John Sauro
Thursday’s rate is a drop from the prior weeks’ 3.60%. This time last year, the 30-year fixed-rate mortgage averaged 4.46%.
A report by FOX Business states that mortgage rates fell and applications surged due to investors’ growing concerns of how China’s coronavirus could impact economic conditions.
The Mortgage Bankers Association reported that applications surged 7.2% higher from the week prior for the week ending on January 24.
Danielle Hale, Chief Economist at realtor.com, told MReport that concerns about the coronavirus’ impact have driven investors into the security of bonds, “accelerating” the drop in 30-year mortgage rates.
“We expect these lower rates to stick around until the virus is better understood, the transmission is slowed, and treatment improves,” Hale said.
She added lower rates are one of several factors helping shift the rent-buy tradeoff back toward buying, even though renting remains the short-term winner in many large markets.
Hale, though, said prospective buyers find homes continue to be an issue, as the market is missing 3.8 million homes.
“Additional new construction is sorely needed to alleviate the current shortage and meet rising demand,” Hale said.
John Sauro
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Source:Daily Dose
