#Mortgage Rate Forecast: Rates To Re-Approach 2015 Lows
Click To See Today’s Rates
Posted July 6, 2015
As Seen On
Mortgage Rates Suddenly Sink
It’s been a wild year for mortgage rates and this week’s interest rate shoppers are about to come out way ahead.
Now that Greece has rejected its creditors’ austerity demands, moving the nation-state moves toward a Eurozone exit, demand for U.S. mortgage-backed securities (MBS) has spiked, which is moving prices up.
Mortgage-backed securities are the basis of today’s mortgage rates. When prices rise, mortgage rates fall.
Overnight, mortgage rates dropped close to 12.5 basis points (0.125%), and rates continue to improve at the market open. Mortgage interest rates are now at their best levels in 16 days and may remain below four percent for the foreseeable future.
Whether you’re a home buyer or existing homeowner looking to make a refinance, it’s an excellent time to compare today’s mortgage rates. Even against last week’s prices, today’s rates look relatively low.
Freddie Mac’s “Old” Survey: Rates At 4.08%
According to Freddie Mac’s weekly mortgage rate survey of 125 mortgage lenders nationwide, the conventional 30-year fixed rate mortgage averaged 4.08% last week.
This is the highest surveyed rate of 2015 and caps a two-month run which has seen rates climb close to 50 basis points (0.50%).
The Freddie Mac rate is available is available to prime mortgage borrowers willing to pay 0.6 discount points plus costs.
Discount points are one-time fees paid at the time of closing and which are used to “discount” a borrower’s mortgage rate. For IRS purposes, discount points can be treated as prepaid mortgage interest which is why, in many cases, discount points are tax-deductible to the borrower.
Each discount point costs one percent of the loan size. A borrower in Orange County, California, therefore, borrowing at the local conforming loan limit of $625,500 and paying 0.6 discount points, should expect a one-time cost of $3,753 at closing.
Today’s mortgage rate shoppers, however, will notice that quoted rates with 0.6 discount points are well below what Freddie Mac reports. This is because of a time-delay inherent in the Freddie Mac survey.
Each week, Freddie Mac surveys mortgage lenders as part of its Primary Mortgage Market Survey. Lenders are invited to reply anytime during the week, up until Wednesday.
According to Freddie Mac’s website, though, the majority of lenders reply back with rates either Monday afternoon or Tuesday morning, which means that by the time to survey is published Thursday morning at 10:00 AM ET, it’s using mortgage rate data that’s at least 2 days old.
Some weeks, the Freddie Mac delay doesn’t make much of a difference; mortgage rates don’t always change from day to day. Other weeks, however, the delay can be a huge deal.
This week is one of those weeks.
On Thursday, the June Non-Farm Payrolls report fell short of Wall Street expectations, which led to a drop in mortgage rates. And then, with markets closed for Independence Day, two events occurred.
First, China’s stock market lost 6% of its value Friday, capping a month in which the Shanghai Index fell 30 percent. The Chinese government stepped in to slow to slaughter, but it’s unclear whether its measure will work.
Then, over the weekend, the people of Greece voted against the austerity demands of its creditors which may lead to the nation-state’s exit from the 19-nation Eurozone and general instability throughout Europe.
Both events pushed global investors away from risky assets and toward safer ones, including U.S. mortgage-backed securities, which has today’s mortgage rates back in the 3s.
All of the action, though, occurred after the Freddie Mac report was released. The 4.08% mortgage rate you see in the headline is linked to different market from a different time.
Last week, when the Freddie Mac survey was being collected, Wall Street was optimistic about jobs; Greece had yet to default on its debt; and China’s market woes seemed contained.
As this week begin, the story looks different.
Should the momentum of last week’s events continue, mortgage rates will likely regain their losses of the last two months, and should start making progress toward their lowest levels of all-time.
Today, mortgage rates start the week at the best levels in more than two weeks.
Economic Calendar For The Week
This week, as mortgage rates trudge below four percent, there is very little on the economic calendar to affect today’s pricing.
There are no releases of major consequence so expect mortgage interest rates to take their cues from the events in Greece, and the path of the Shanghai Index in China; and, from the multitude of Federal Reserve speakers, including Fed Chairwoman Janet Yellen.
In general, what’s bad for the world’s economy is good for U.S. mortgage rates so watch for news from the Eurozone and China, and listen for clues when Fed members speak.
The week’s complete breakdown is as follows:
- Monday. PMI Services Index; ISM Non-Manufacturing Index
- Tuesday. Consumer Credit
- Wednesday. FOMC Minutes; San Francisco Fed President John Williams speaks; 10-Year Treasury Note auction
- Thursday. Minneapolis Fed President Narayana Kocherlakota speaks; Federal Reserve Governor Lael Brainard speaks; Federal Reserve Fed President Esther George speaks; 30-Year Bond auction
- Friday. Cleveland Fed President Eric Rosengren speaks; Federal Reserve Chairwoman Janet Yellen speaks
Of particular note this week are the U.S. Treasury auctions of debt, which may signal the near-term direction for U.S. mortgage rates.
Treasury debt doesn’t link to mortgage-backed bonds directly, but both asset classes are considered to be extremely “safe”. Should the 10-year note and 30-year bond draw large demand at auction, then, it may suggest big demand for MBS which helps to push mortgage rates down.
Since the start of the decade, mortgage rates have never dropped more than 20 basis points (0.20%) in a week. This week, it could happen.
Get A Live Mortgage Rate Quote Now
Today’s mortgage rates are their lowest since mid-June. It’s an excellent time to reconsider a home loan refinance, or to make an offer to purchase a home. Rates may drop lower but, then again, maybe not.
Get an instant mortgage rate quote now. Rates are available online with no social security number required to get started and with no obligation to proceed whatsoever.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.