Mortgage Rate Recap and Outlook for the Week Ending October 16, 2019

The US economy added 140,000 jobs in September, thus keeping the unemployment rate hovering around the acceptable 3.7% mark. And so, though job growth has cooled, we are still at a point where the layoffs are not going out of hand- a possible turnabout that could compromise the US expansion project.

Exports are weak, thanks to the trade war. The manufacturing industry is unquestionably in a state of contraction and the service sector has been carried away in its slipstream. And while the US, nobly, is not transferring tariff costs to the end-consumer yet, its heavily stunted supply chain is feeling increasingly handicapped by the day (owing to Chinese tariffs)

The incongruity between American housing demand and supply cannot be overstressed. America’s housing inventory, affected by shifting demographics, baby boomers’ decision to age in place, and homebuilder’s inability to create enough entry-level homes, has been nothing to boast about.

Mortgage Rates: a mixed story

This week’s Mortgage Banking Associations’ (MBA) weekly rate survey offers a mix of increasing, decreasing and unchanged mortgage rates.

According to the MBA Weekly Survey: “The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 3.92 percent from 3.90 percent, with points decreasing to 0.35 from  0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The effective rate increased from last week. ”

1 point in cost = 1% of the loan amount

 “The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $484,350) remained unchanged at 3.90 percent, with points decreasing to 0.23 from 0.28 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.”

“The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.32 percent from 3.35 percent, with points increasing to 0.31 from 0.30 (including the origination fee) for 80 percent LTV loans. The effective rate decreased from last week.”

 “The average contract interest rate for 5/1 ARMs increased to 3.37 percent from 3.25 percent, with points decreasing to 0.23 from 0.34 (including the origination fee) for 80 percent LTV loans. The effective rate increased from last week. ”

Mortgage Rate Activity and Predictions

Bankrate’s weekly survey of mortgage and economic experts, countrywide, throws up pretty evenly poised results for the week ahead (16^th October to 23^rd October). Out of those surveyed, 33% foresee a rise in rates while 33% are bracing for a fall. The remaining 33% predict an unchanged interest rate (with a maximum movement of two basis points either side).

The chart below, from Freddie Mac’s weekly mortgage survey, shows conforming rates for the week- 10^th October to 16^th October-  have looked up slightly, posting 0.10% hike for 15Y fixed and 0.12% hike for 30Y fixed.

Freddie Mac’s weekly mortgage survey noted, “Despite this week’s uptick in mortgage rates, the housing market remains on the upswing with improvement in construction and home sales. While there has been a material weakness in manufacturing and consistent trade uncertainty, other economic trends like employment and homebuilder sentiment are encouraging.”

Mortgage Rate Lock Advice

 Economic uncertainty and subsequent volatility is a key factor behind the confused state of borrowers. To lock or not to lock?  However, with the mortgage rates at an incredibly low point, locking even 45+ days away from closing may not be a bad idea. This said if you are not among the conservative borrowers and are ready to gamble on the floating, be on guard about the news that affects the economy of the country.

Related Posts