With interest rates approaching reaching historic lows, the application volume for mortgages jumped a seasonally adjusted 48 percent last week compared with the previous week, according to the Mortgage Bankers Association’s weekly survey.

Application activity for the week ending December 19th was 124.6 percent over the same period a year ago,
the Washington, D.C-based MBA said. The spike in applications coincided with another drop in mortgage rates,
as the government’s efforts to unfreeze the residential-mortgage market show further signs of having the desired effect.

Applications to refinance existing mortgages increased 62.6 percent on a week-to-week basis, while applications filed for mortgages to buy homes increased a seasonally adjusted 10.6 percent.

Refinancings made up 83.2 percent of all applications filed last week, up from 76.9 percent the previous week.

According to the MBA survey, interest rates fell across the board:

• Rates on 30-year fixed-rate mortgages averaged 5.04 percent last week, their lowest level in more than five years.

This was down from 5.18 percent the previous week.

• Fifteen-year fixed-rate mortgages averaged 4.91 percent, down from 4.93 percent the week before.
• One-year ARMs averaged 6.36 percent, down from 6.63 percent.

Source: Mortgage Bankers Association and MarketWatch (12/24/08)

If you enjoyed this post, make sure you subscribe to my RSS feed!

The week before last, information was “leaked” from the Treasury Department that they were “targeting” 4.250 -4.500% as a rate they want to get rates down to on 30 yr fixed. Please know that this was recanted the following day by both the Treasury Dept. and the Federal Reserve as they do not have a target, nor can they make it happen. Mortgage interest rates are not dictated by the Federal Reserve or the Treasury Dept., they are derived directly from the Bond Market on Wall Street on all Conforming and Government loans.

However, the Fed has been buying up Mortgage Backed Securities(MBS) in hopes of pushing down rates, which they have been highly successful at to date - they have targeted specifically what is called the FNMA 30 yr 4.0% coupon traded on the Bond market, there are trillions of dollars in MBS and the Fed has billions to work with, so they have made the very wise decision to utilize the limited amount of money they have to work with and “laser focus” on a specific coupon to try and drive rates down.

What this has done is brought confidence back to the Bond market and has gotten traders on Wall Street to start bidding down rates. So there are no guarantees that these rates will ever come to fruition and to not chase rates - rates are at historic lows, but could jump at any time if market sentiment loses confidence or changes direction - this can happen at a moments notice - Caution is highly recommended and locking while “the iron is hot” is a wise judgement call on anyone’s part.

Market Commentary:

Mortgage bond prices rose last week, which helped mortgage interest rates improve, but only slightly. We saw a huge rally following the Fed rate cut Tuesday. Unfortunately the gains were short-lived and most were erased the following day. Trading remained volatile throughout the remainder of the week. The White House stepped in to help the troubled auto industry Friday, which sent stocks higher that morning at the expense of mortgage and Treasury bonds then reversed course late day. For the week, interest rates on government and conventional loans fell by about 1/8 to 1/4 of a discount point.

The Treasury auctions will set the tone for trading this week. Foreign demand for dollar denominated assets will be the focus. The bond market will close early Wednesday ahead of the Christmas holiday Thursday. Trading will resume Friday. This shortened trading week may lead to mortgage interest rate volatility.

Revised GDP

The Gross Domestic Product (GDP) is one the most important reports during any given quarter. GDP is a measure of US economic output and spending. The report is significant in that it provides investors, analysts, traders, and economists with a comprehensive report of the direction of the economy. In addition, it also influences the decisions of Federal Reserve policy makers, Congressional budget employees, and corporate financial planners.

GDP is the sum total of goods and services produced by the United States. The four major components of the GDP release are consumption, investment, government purchases, and net exports. The initial report is often based on incomplete data. Therefore, additional revisions are released over the following two months. There are often substantial differences between the initial release and the revisions. The mortgage-backed security market generally responds favorably to weaker GDP growth.

The revised third quarter gross domestic product data this week has the potential to move mortgage bond prices, especially amid the thin trading that is likely.

If you enjoyed this post, make sure you subscribe to my RSS feed!

30 yr fixed mtg		5.53%		5.70%
15 yr fixed mtg		5.26%		5.40%
5/1 ARM		5.88%		5.94%
30 yr fixed jumbo mtg		7.09%		7.05%
5/1 jumbo ARM		6.00%		6.03%

If you enjoyed this post, make sure you subscribe to my RSS feed!

Alright, if you have been on the search to buy a home, it’s time to buckle down and pull the trigger. You will want to lock in your rate now. The interest rates have spiked in the past 10 days and there is a potential danger that it could get worse. The average interest rate on a 30-year fixed loan has soared to 6.02% from 5.82% in just a week. The cause of this is the rising inflation fears that have sparked a jump on the long-term government bonds.

That means on a $300,000 mortgage, your monthly payments will increase $38 and the total interest on the life of the loan will increase $4,000. You can still get some good deals as there are a few lenders out there offering rates below 6%, but not many.

No one knows what is in store next, but if you find a reasonable deal, don’t think twice about putting a deposit to lock the rate in for a month or two if you are able.

If you enjoyed this post, make sure you subscribe to my RSS feed!

30 yr fixed mtg		5.78%		5.87%
15 yr fixed mtg		5.36%		5.48%
5/1 ARM		5.31%		5.57%
30 yr fixed jumbo mtg		7.08%		7.21%
5/1 jumbo ARM		6.23%		6.31%

If you enjoyed this post, make sure you subscribe to my RSS feed!

30 yr fixed mtg		5.62%		5.65%
15 yr fixed mtg		5.21%		5.23%
5/1 ARM		5.39%		5.43%
30 yr fixed jumbo mtg		7.02%		7.05%
5/1 jumbo ARM		6.19%		6.25%

If you enjoyed this post, make sure you subscribe to my RSS feed!