Weekly Rate & Market Update 6-10-16
It’s that time of year, our 5th Annual Flag Collection and Retirement will take place on Friday July1st!
Question of the week: Can rates get any lower?
Answer: Maybe.
Rates are currently near their all-time lows seen in 2012. Can the conforming rate hit the 3.125% we experienced for eight straight weeks and thirteen of the final fourteen weeks of 2012?
Here are reasons why rates may go lower and reasons why they may not:
Rates may go lower because the economy is still not growing with any strength.
Rates may go lower because the latest employment reports show a slowing in job growth which could be predecessor to a contraction in employment.
Rates may go lower because of the global economy and markets, for instance the German Bund, their ten year bond, has reached zero percent interest, and Japan’s central bank has had negative interests rates for several months.
Rates may go lower because corporate profits, while up slightly in the first quarter after declining in 2015 for the first time since the Great Depression, are not growing.
Rates may not go lower because some segments of the economy, like housing, are doing well and may pull the rest of the economy’s growth upward.
Rates may go up because if the economy does begin the more robust growth many anticipate then employment will grow.
Rates may go up because perhaps the zero to negative rates in Japan and Europe may result in economic growth.
Rates may go up if the U.S. economy grows increasing corporate profits.
You will notice there are no comments about the Federal Reserve and what decisions they may make with the discount rate. The expectation is that we will see another 0.25% rate increase from the Fed this summer. Remember though that mortgage rates move independently of the Fed. Rates are lower now than when the Fed raised its rate in December for the first time in nine years.
As you can see for every reason for a rate to go up there is a contrary reason for it to go down. So will rates go up or down? I see few reasons for rates to go up significantly in the near, or even medium, term. But will they go down? I see that as a challenge for the markets but more likely than an increase. Note if there do drop it will not be by very much, we are about as low as rates can go for mortgages.
Remember, with Dennis it’s not just a mortgage, it’s your complete financial picture.
Rates for Friday June 10, 2016: With not a lot of domestic economic news, mortgage rates this week traded on technical factors. After Mortgage Back Securities (MBS, which determine mortgage rates) climbed early in the week they bounced off of the highs of the current trading range. As a result rates are flat from last week. Looking forward we are in a tight trading range right now and rates should remain in the range they have been in for the past three months.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS
30 year conforming 3.375% Flat
30 year high-balance conforming 3.50% Flat
30 year FHA 3.25% *** Flat
30 year FHA high-balance 3.25% *** Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down (3.5% for FHA) with 740 FICO score for purchase mortgages. ***FHA rates have no points and credit towards closing costs, recent rate change reduces credits
The Weekly Rate & Market Update is coming to you from Palm Desert this week as I am having a boys golf outing. Thankfully the temperatures are much lower than anticipated (staying below 100 degrees). Speaking of ranges, I’m hoping today’s score was the high of the range I will shoot for our remaining two rounds!
Have a great week,
Dennis
