Mortgage Rates Lowest In 2 Years

Interest on 30-year fixed-rate mortgages fell to 6.10% this week, the lowest level in 2007, and the lowest since the week of October 13, 2005, said Freddie Mac. 15-year fixed-rate mortgages averaged 5.73%, down from 5.83% last week, which is the lowest since January 2006. I guess now is the perfect time to refinance a mortgage if you can find a lender, but that could be hard, unless you have a perfect credit record. 5-year adjustable-rate mortgages slid to 5.86% from 5.88% last week, not that spectacular but still lower. One-year adjustable mortgages were at 5.43%, up from 5.42% a week ago. Speaking about the housing sector, Freddie Mac’s chief economist Frank Nothaft noted that the “overall picture” looks “glum with no immediate relief in sight”. So it is indeed.

Mortgage rates this week

Mortgage interest rates dropped this week after two consecutive increases, according to Freddie Mac data. 30-year fixed-rate mortgages carried an interest rate of 6.37%, down from 6.42% a week ago. 15-year fixed-rate mortgages averaged 6.03%, down from 6.09%. 5-year adjustable rate mortgages were at 6.11% compared to 6.15% last week. One-year adjustable home loans carried an interest of 5.58%, down from 5.60%.

A year ago, 30-year mortgages had an interest rate of 6.30%, 15-year fixed loans were at 5.98%, 5-year ARMs averaged 6.00% and 1-year ARMs carried an interest of 5.46%. Back then, however, the Fed Funds rate was higher. Well, this is supply and demand, and there ain’t much of the former in mortgage lending right now, so rate cuts can’t help borrowers. I’m reading a lot of grim forecasts for the months ahead, does the Fed (or anyone for that matter) have other fresh ideas?

More job cuts at mortgage lenders

It’s not just subprime, mortgage woes are affecting Alt-A and prime borrowers, so lenders are taking losses and shutting down branches. Wells Fargo announced on Thursday it will close its nonprime wholesale lending operations in Bator Rouge, Louisiana, and in Des Moines, Iowa, resulting in 200+ job cuts. Impac Mortgage Holdings also cut 190 jobs this week, or roughly 20% of its workforce.

Moody’s Economy.com predicts that lending troubles will persist through the remaining part of 2007, with a peak in delinquencies in mid-2008. Foreclosure rates on “2006-vintage” home loans are expected to reach nearly 20% in late 2011, 3 times higher than the forecast foreclosure rate on mortgages originated in 2004. We don’t get forecasts quite like this one very often.

Interest rates dropped last week on weak lending application and sales data. 30-year fixed-rate mortgages averaged 6.69%, down from 6.73% a week ago, 15-year fixed-rate loans edged down to 6.37% from 6.38%. Five-year ARMs were at 6.30%, compared to last week’s 6.35%, and one year adjustable home loans declined to 5.69%, from 5.73% a week earlier.

Countrywide reports quarterly results

The slowdown in the housing sector is hitting Countrywide hard: income fell 33% in the second quarter, and the market is expected to remain “challenging” for the rest of the year. Shares dropped 8.7% on the news, reaching $31.11, the lowest level since November 2005.

Countrywide’s full-year earnings forecast was cut to a range of $2.70-$3.30 per share from April’s $3.50-$4.30 and January’s $3.80-$4.80. Revenue dropped to $2.5 billion from last year’s $3 billion.

Countrywide has recently tightened its credit guidelines and eliminated some especially risky mortgage products, but losses associated with mortgages issued in recent years are expected to climb in the coming months. The company has set aside $292 million for credit losses, more than four times last year’s provision of $61.9 million. According to Countrywide’s CEO Angelo Mozilo, losses were related to “prime” loans given to borrowers with good credit, not subprime mortgages as one would expect. What happened to “contained” subprime losses?

Mozilo said that problems are likely to persist for the rest of 2007 and well into 2008, possibly 2009. No wonder we’re seeing such robust insider selling at Countrywide.

Bernanke concerned over housing

In his testimony to congress, Federal Reserve Chairman Ben Bernanke said that the subprime mortgage sector has “deteriorated significantly”, causing “increased concerns” among investors in some other types of financial instruments. It seems that top figures in the industry are finally admitting that the problems in subprime lending are a serious issue, with Freddie Mac’s CEO Richard Syron saying he doesn’t believe that housing has “hit bottom”, and that “things are going to get worse”. What we’ve seen so far may only be the beginning of a huge collapse, not the “rebound” in housing that some had hoped for.

The Fed has trimmed its forecast for growth in 2007 and 2008, but inflation forecasts remain unchanged. Unemployment is expected to rise slightly.

Amid a flood of economy-related news this week, mortgage interest rates remained mostly unchanged from last week’s readings, probably because the general outlook changed little. The 30-year fixed-rate mortgage remained close to the highs for this year at 6.73%, and the 5-year adjustable-rate mortgage averaged 6.35%, the same as a week ago. 15-year fixed-rate mortgages edged down to 6.38% from last week’s 6.39%, and one-year adjustable loans were up slightly at 5.72% from 5.71% a week ago.

Mortgage cost disclosures “confuse” borrowers

A Federal Trade Commission survey found that current mortgage cost disclosures are unclear and confusing to most consumers. More than 80% of the borrowers surveyed could not identify the upfront costs associated with a loan. Four out of five borrowers could not understand why the APR (annual percentage rate) was different from the stated interest rate on the loan, and more than 60% of the participants did not notice that their terms included a pre-payment penalty. More than 20% of those surveyed could not identify the total amount of settlement costs.

Researchers also found that many borrowers could not properly understand their mortgage disclosures, and were not fully aware of the costs associated with their loans. Many were not aware of restrictions, such as prepayment penalties, included in their own loan terms. FTC researchers concluded that disclosure forms were to blame and developed a simplified disclosure form which clearly specified the type of loan, any restrictions, and loan charges, as well as the APR, monthly payments and other information.

When consumers were shown this new form, they were able to understand loan terms much better and give correct answers to questions about their mortgages. This study is likely to trigger a change in mortgage disclosure forms, which will help consumers make better financial decisions and avoid risky loans.

Mortgage rates moved up again

Reading mortgage-related news has been quite boring lately. Another story on low price appreciation, another story about a family of immigrants who were driven into a mortgage they couldn’t afford, some politician inventing new ways to preserve home ownership, some gloomy stats from the MBA … I’m almost getting used to all this. And then – shock horror – mortgage rates keep rising steadily for weeks and weeks. We were talking about 6.15% on a 30-year fixed-rate mortgage a month ago, and now the rate is 6.74%, up from 6.53 last week. Another bite out of affordability.

According to data released by Freddie Mac, 15-year fixed-rate mortgages carried an interest of 6.43, up sharply from 6.22% last week, and the five-year adjustable-rate home loans were at 6.37%, compared to 6.24% a week ago. One-year adjustable-rate mortgages averaged 5.75%, an increase from last week’s 5.65.

Another report issued by Freddie Mac on Thursday is drawing analysts’ attention – its first quarterly financial results in several years. Freddie Mac announced a loss of $211 million, or $0.46 per share, way lower than the expected $1.01 gain. Last year, Freddie Mac reported profit of $2 billion, $2.80 a share. Richard Syron, Freddie Mac’s CEO, however, believes that the company is on the path to stabilization and its “credit position has remained strong”. We’ll be looking forward to second-quarter results.

Mortgage rates drop, applications rise

Mortgage rates kept falling for a third consecutive week and reached levels last recorded in early December, according to a survey by the Mortgage Bankers Association issued Wednesday.

As rates dropped, due to last week’s troubles in the stock market, mortgage applications jumped, marking a 7.3% increase for the week ended March 2. Applications were 16.7% above the levels reached this time a year ago.

The rates on 30-year fixed mortgages averaged 6.04%, 0.12 lower than a week earlier, and lower than last year’s 6.31% rate. Fixed 15-year mortgage rates were down to 5.73%, from 5.84% last week. One-year adjustable-rate mortgages slid to 5.79% from 5.92 a week ago. Refinancing applications increased, as consumers saw the low rates as a perfect opportunity to refinance into a fixed-rate mortgage or to lock in better terms.

More refinancing applications are expected to be filed, as ARMs taken in recent years are poised to adjust in 2007. Housing market activity will be closely monitored in the weeks to come, with the Fed meeting for policy-making on March 20-21. While a rate hike is deemed highly improbable, there is some speculation as to whether the Federal Reserve will cut rates or not.

Mortgage rates slide again

30-year fixed-rate mortgage rates dropped to 6.22% this week, from 6.30% last week. This is the lowest level since mid-January, when it averaged 6.21%. According to analysts, the drop reflected a relative weakness in the real estate industry, illustrated by reports of slowing new home construction. Housing starts fell 14.3% in January to the lowest reading since 1997, sparking concerns that the declining housing market may have a serious impact on economic growth. The drop was in part due to large numbers of unsold inventories currently on the market.

15-year fixed rates also dropped this week, reaching 5.97%, compared to 6.03% last week. 5-year adjustable rates fell to 5.96% from 6.01 a week earlier. One-year ARMs dropped from 5.52% to 5.49%.

Lower mortgage rates will make new homes more affordable, so there’s hope this will help absorb the oversupply of unsold houses. But will low rates be around for long enough to really influence the market? This week’s drop is definitely caused by changing circumstances, and yet home prices have to drop further before balance is restored. When and how this is going to happen is not entirely clear, as increasing sales volumes tend to push home prices up as well, so if houses begin to sell faster again, sellers won’t be willing to cut prices.

Mortgage rates move higher

Following recent financial reports indicating steady economy growth, the rates on 30-year fixed mortgages rose to 6.34%, the highest level since October 2006. Freddie Mac reported that the rates on other types of mortgages also increased, the 15-year fixed-rate mortgage reaching 6.06% and the one-year ARMs 5.54%.

The 30-year fixed rate is nearing the October 2006 levels, when it was at 6.40% in the week ending Oct. 26th. The rise occurs after reports of steady financial growth were issued earlier this week. The economic results of the last quarter of 2006 were better than expected and economists hope this will influence the housing market which is slowly beginning to stabilize.

Surprisingly, delinquencies are becoming more frequent in spite of a relatively strong economy. Mortgage companies are beginning to take measures to prevent serious problems. They’re warning their customers of upcoming rate adjustments and calling borrowers within days after a missed payment. Banks provide information and assistance in dealing with mortgage payments and even allow some borrowers to refinance their ARMs into a different loan at no cost. According to Mark Zandi, chief economist at Moody’s Economy.com, the increased levels of delinquencies may be due to a weaker housing market and the widespread use of adjustable-rate mortgages, which are now beginning to adjust.

To avoid foreclosure costs, banks allow their clients to sell their properties for less than the due amount and forgive the remaining debt. This method is called a short sale, and helps borrowers avoid having a foreclosure on their credit reports.

A group of major lenders are planning a national advertising campaign, beginning this spring, which shall promote a toll-free number (888-995-HOPE) for mortgage and homeownership counseling.

Mortgage activity: Freddie Mac reports mixed trends

Preliminary estimations of December’s financial indicators show signs of steady growth in the economy; the final reports are expected next week. Mortgage rates have shown mixed activity, with the 30-year fixed rate rising since last week and one-year and hybrid ARMs declining. All rates are somewhat higher compared to last year’s indications, the 30-year fixed-rate mortgage reaching 6.25 – the highest level since November, vs. 6.12% this time last year, and five-year ARMs at 6.00 vs. 5.75 in January 2006. The 15-year fixed-rate mortgage remains unchanged since last week at 5.98%.

The government report on the economy’s performance during the last 3 months of 2006 will be released next week and it shall point a direction for the interest rates activity.