Tag: lending

Yet again: Economists Predict Interest Rate Hike In 2015

Carl Setzer

I’ve ready many predictions about the impending interest rate hike, like this one from Monday over at Housingwire. Now, it probably easy to add snark to my tone, but it’s not there. I understand economics and why interest rates cannot remain at this level. I just find it amusing that I’ve seen “rates rising” predictions for years without the rates really rising (ok, they’ve moved up, but that’s not the point).

It’s probably nearly impossible to predict when the rates will go up. But, really, for most of us, that really shouldn’t matter. What does matter is that they WILL go up, whether that’s this month, this quarter, this year or next; everything about the system demands they rise. Trying to game this and grab rates at their peak lowness (actually, I think that time has past) is foolish. If you are in place to buy or refinance, just go and do it. Remember the African adage: the best time to plant a tree is 5 years ago, the second best time is today.

Midweek Mortgage Thoughts

Carl Setzer

I was just reading Mortgage applications drop 6.6% on jumbo refi decline over at Housing Wire. There are some good insights into the national mortgage trends, which are a critical part of the housing market.

Refis are still the lion’s share of the mortgage market right now, holding 65% of mortgage activity. As the headline says, the jumbo loan market (>$417,000) is driving a decrease in mortgage applications. The larger the balance of the loan, the larger the dollar amount of any percentage rate fluctuation. Therefore, “borrowers with jumbo loans tend to be most sensitive to changes in rates. That sensitivity has been clearly apparent in the past few weeks with double and even triple digit percentage changes (emphasis mine) in refinance application volume for jumbo loans.” Jumbo loan holders are clearly feeling less motivated to refi right now.

The article expands out, slightly, looking at the rest of the market. Let’s follow along:

  • Adjustable-rate mortgage (ARM) share decreased to 8.2% of total applications.
    • I’d say that’s good on a macro level, as ARMs are a great vehicle to increase short-term affordability with lower rates about 1/2 that of a 30 year fixed. They are a pretty nice deal for the banks; they make money from interest. However, you want to be paying down principle, as that’s the main way to build equity.
  • Let’s Look At Interest Rates
    • FHA – 30-year fixed-rate mortgages  increased to 3.84% from 3.81%
    • 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.13% from 4.10%
    • 15-year fixed-rate mortgages remained unchanged at 3.28%
    • 5/1 ARMs remained unchanged at 2.94%
  • And a breakdown of mortgage types:
    • FHA  increased from 8.3% last week to 8.9% this week.
    • VA  increased from 9.6% last week to 10.7% this week.
    • USDA increased from 0.8% last week to 0.9% this week.

One key thing to keep in mind with all this: these are national numbers, and a look at the past. This stuff fluctuates daily, and regionally. But it does give some good insight into the overall picture.

Happy Wednesday, everyone!

Mortgage Qualifications Ebb & Flow

Carl Setzer

Since the beginnings of “the financial crisis”, lending rules tightened massively. I’ve been hearing that these criteria have been loosening, at least slightly. Then I have these message in my inbox:

 

Loans

 

Not Tax

 

Though getting lending more accessible is desperately important to rebuild the housing market, I don’t want to see a return to the “fog the mirror” qualification process.

 

My sincerest hope is that we can find some type of middle ground. However, society and pendulum swings are massive forces to be dealt with.