Mortgage rates were at their highest levels since early October as of yesterday afternoon, and in general, have been in the throes of the most aggressive move higher since the 2013 taper tantrum. Much of the motivation has come from European markets. There is a domino effect, of sorts, leading from extremely large moves in Europe that ends up visibly affecting mortgage rates in the US. As such, it’s no surprise to see that benchmark interest rates in Europe were at their long-term highs yesterday as well. It’s also no surprise that when the pendulum swung the other way in Europe this morning, US interest rates were able to come along for the ride.
As is always the case when Europe is leading a market movement, US rates get a lesser version of the improvements. Fortunately, today was so big that the improvements were noticeable. Many lenders moved back to quoting conventional 30yr fixed rates at 4.125% as opposed to the recently more prevalent 4.25%. For borrowers whose contract rate remained the same, closing costs would be significantly lower today. In some cases as much as half a point lower (meaning $500 for every $100k financed).
Unfortunately, due to the fact that we were at the weakest levels of the year only yesterday, it’s way too soon to assume that the good times will continue to roll. In fact, we could have several more days like today and remain very much at risk of a longer term move toward even higher rates. It’s still safer to plan for that risk as opposed to an opportunity that has yet to materialize.
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Housing News
WASHINGTON, D.C. (June 11, 2015) -The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 459,000 units in May 2015, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.
“Mortgage applications to homebuilders declined in May following an improved start to the year. Consistent with the intent to complete new homes in time for the school year, applications fell at a similar rate between April and May last year. That said, application volume is 15% percent ahead of the same month last year,” said Lynn Fisher, MBA’s Vice President of Research and Economics.
The seasonally adjusted estimate for May is a decrease of 5.7 percent from the April pace of 487,000 units. On an unadjusted basis, the MBA estimates that there were 45,000 new home sales in May 2015, a decrease of 6.3 percent from 48,000 new home sales in April.
MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level. This data also provides information regarding the types of loans used by new home buyers. Official new home sales estimates are conducted by the Census Bureau on a monthly basis. In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.
Sources MND, CNBC, Bloomberg, MBA