Are Mortgage rates really under 3%?
When Freddie Mac released its weekly mortgage survey on Thursday it did so with the heading: “Mortgage Rates Drop Below Three Percent Again.”
Which they are not now.
The problem lies with the methodology. Freddie Mac surveys lenders from Monday to Wednesday with the major weighting given to Monday’s rates. As I have explained in many postings over the years (see Mortgage Rates back to 3% – again as an example), the 30-year Fixed Rate Mortgage (FRM) is priced based upon a premium that investors, when they buy pools of mortgages, demand over the yield on the nearest-equivalent US Treasury – which is the 10-year Note (10T). Thus, if the yield on 10T increases from Monday to Thursday – as it did this week – by the time of Thursday’s announcement the FRM may have changed – as it did this week.
Mortgage News Daily had a great article this week and I am going to use their charts. I recommend signing up for their newsletter, a source of great information and opinion. (more…)
Mortgage rates back to 3% – again
The 30-year Fixed Rate Mortgage ticked back up to 3% this week. I re-read Are Mortgage Rates headed Up or Down? which I published in June and I still think it summarises the situation quite well. Hence I have included the link rather than repeating the arguments.
The proximate cause for the increase in mortgage rates this week was the increase in the yield on the US Treasury 10-year Note. The increase started last week (after the Freddie Mac weekly survey, which is collected from Monday-Wednesday) when the Federal Reserve (Fed) confirmed that, if current trends continue, it will start to reduce its purchases of both Treasuries and Mortgage Backed Securities (MBS) soon and aim to end purchases by the middle of 2022.
At the same time, we saw a rate increase in Norway – the first in Europe- following earlier increases in Brazil and South Korea. And while the Fed continues to state that it will not consider actual rate increases (I am not sure why they refer to it as “lift off”- sounds like rocket-speed increases which it will not be) until after the end of the bond purchases, investors noticed a shift in the number of members forecasting a rate increase in 2022 rather than 2023.
And inflation continues to run hot. The Fed thinks this is transitory, but many others fear that it will be sustained forcing the Fed to raise rates sooner than it currently anticipates.
The Numbers (more…)
Flood Insurance Changes Coming Oct 1
Changes are coming to the flood insurance policy sector taking effect October 1st on new policies and April 1, 2022 on any outstanding renewal policies. I will write further as more details are revealed but these are the highlights from the FEMA Risk Rating 2.0 announcement:
1. Flood zones and Elevation Certificates will no longer be a rating factor (Flood zones will still be present for mortgage purposes)
2. Elevation Certificates will no longer be needed to determine rate
3. No more preferred rate tables for X,B,C Flood zones
4. Flood Vents (2 openings on 2 walls on lowest level) will no longer provide significant savings
5. Machinery on ground floor will impact rate (ex:a/c, water heater, washer/dryers)
6. Grandfathering: Policyholders will still be able to transfer their discount to a new owner by assigning their flood insurance policy when their property changes ownership
7. FEMA will continue to offer premium discounts for pre-FIRM subsidized and newly mapped properties (ex: Zone X remapped to A Zone, rate from X can be grandfathered as long as there is no coverage interruption)
8. Replacement Cost Value will impact the rate (Historically, lower valued homes were paying more than they should and those that had higher value homes were paying less than they should)
FEMA “predicts the average rate increase will be about 10%.”
Click here to be directed to the flood insurance page on my website.
Naples August Housing Market Review
Bonita/Estero August Market Summary
Prediction: Lots of International Buyers Over the Next Year
Andrew Oliver
REALTOR®| Market Analyst | DomainRealty.com
Naples, Bonita Springs and Fort Myers
Andrew.Oliver@DomainRealtySales.com
m. 617.834.8205
www.AndrewOliverRealtor.com
www.OliverReportsFL.com
_____________
Market Analyst | Team Harborside | teamharborside.com
Sagan Harborside Sotheby’s International Realty
One Essex Street | Marblehead, MA 01945
www.OliverReportsMA.com
Andrew.Oliver@SothebysRealty.com
Sotheby’s International Realty® is a registered trademark licensed to Sotheby’s International Realty Affiliates LLC. Each Office Is Independently Owned and Operated
Mortgage refinancing just got cheaper
The Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac will eliminate the Adverse Market Refinance Fee for loan deliveries effective August 1, 2021.
Lenders will no longer be required to pay Fannie and Freddie a 50-basis point fee when they deliver refinanced mortgages. The fee was designed to cover losses projected as a result of the COVID-19 pandemic. “The success of FHFA and Fannie and Freddie’s COVID-19 policies reduced the impact of the pandemic and were effective enough to warrant an early conclusion of the Adverse Market Refinance Fee.” FHFA’s expectation is that those lenders who were charging borrowers the fee will pass cost savings back to borrowers.
“Santa Claus has come early for homeowners looking to refinance their mortgages,” said Greg McBride, chief financial analyst for Bankrate.com. “The fee had often resulted in an increase of one-eighth percentage point in rate.” (more…)
Adjustable-Rate Mortgages Staging a Comeback
Applications for Adjustable-rate mortgages (ARMs) increased 12.5% year-to-year for the week ending June 18, according to the Mortgage Bankers Association (MBA), as the discount from the 30-year FRM has widened in recent weeks.
ARMs dropped in popularity after the 2008 financial crisis, but they are starting to reemerge as buyers contend with record high home prices. “The epic surge in home prices has people looking to save money on monthly payments anywhere they can,” says Matt Graham, chief of operations at Mortgage News Daily.
Source: Freddie Mac
Hello sub 3% Mortgages – again
This week’s drop below 3% – again – reminded me that the only one thing more fraught than commenting on mortgage rates is trying to predict where rates are headed. (see below for some of my posts about mortgage rates.)
After rising steadily from 2.65% at the beginning of the year to 3.18% by the end of March, the 30-year Fixed Rate Mortgage (FRM) has backed off again and this week the rate dropped back under 3%.
Freddie Mac weekly survey
“Party on, dude” says the Federal Reserve
Former Federal Reserve Chair William McChesney Martin, Jr famously said: “The Federal Reserve…is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.”
This week, current Fed Chair Jerome Powell in effect said “party on, dude.” As the New York Times commented: “The official view of the central bank’s leaders now is that it has been an overly stingy host, taking away the punch bowl so quickly that parties were dreary, disappointing affairs.
The job now is to persuade the world that it really will leave the punch bowl out long enough, and spiked adequately — that it will be a party worth attending. They insist punch bowl removal will be based on actual realized inebriation of the guests, not on forecasts of potential future problematic levels of drunkenness.”
Chairman Powell’s comments
“We will continue to provide the economy the support that it needs for as long as it takes.” (more…)
Goodbye sub 3% mortgages
It was only last July that the 30-year Fixed Rate Mortgage (FRM) dropped below 3% for the first time and this week it moved back above 3% again, following the direction of the 10-year Treasury Note (10T).
Where have all the sellers gone?
As I read this New York Times article: Where have all the houses gone? my mind went to Yogi Berra’s line of “it’s deja vu all over again” as I checked my files and discovered that this will be my 5th article with this title – and the first was written in 2013.
Let’s look at the what and the why.
First, the what. This chart shows that inventory has plummeted across the country:
The why (more…)
Are mortgage rates about to rise?
Following the Georgia Senate election results, which gave control of the Senate to the Democrats, along with the House of Representatives and the White House, the yield on the 10-year Treasury Note (10T) – the most sensitive to increased Government spending – jumped from 0.93% on Monday to 1.13% on Friday, based upon the expectation that increased Government spending would lead to more borrowing which would need higher interest rates to attract investors.
Why does this matter for mortgage rates? Because the rate on the 30-year Fixed Rate Mortgage (FRM) is based upon an extra yield – spread – that investors require over that available on 10T. The national average reported on Thursday ( based on rates from Monday-Wednesday) was a record low of 2.65%, but next week will almost certainly see an increase. (more…)