The Home Buyer's Korner

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May 7th, 2015

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Average Mortgage Rates for May 7th, 2015

rates

Mortgage rates jumped this week with the yield on the 10-year Treasury, which reach its highest level since March 6th. Normally, we’d be seeing the 10-year Treasury fell on all the bad economic news and consequently a fall in mortgage rates. However, it appears that the European Union’s Quantitative Easing measures are keeping European investors home and investing in their own markets. However, we could see a move in the near future by European investors to move back to U.S. Treasuries if confidence continues to wane as dissipating worries over deflation in the Eurozone has prompted a global sell-off in their government bonds.

Of recent, not having a supply of foreign investors has created lesser demand for our bonds and forces our central bank to raise rates to attract other investors. We’re a globe economy now and with rates still at historical lows, it’s a small price to pay to help our largest trading partner enacting quantitative measures to stimulate their economy and moving away from European austerity and we can only hope it works as well for them as it did for us.  

This week was the highest for mortgage rates and the 30-year fixed since the last week of December.

  1. The benchmark 30-year fixed-rate mortgage rose to 3.80 percent from 3.68 percent last week, according to Freddie Mac’s Rate Survey. One year ago, that rate was 4.21percent. Four weeks ago, it was 3.66 percent. The mortgages in this week’s survey had an average total of 0.60 in fees and points.
  2. The benchmark 15-year fixed-rate mortgage rose to 3.02 percent from 2.94 percent with an average total of 0.60 in fees and points.
  3. The benchmark 5/1 adjustable-rate mortgage rose to 2.90 percent from 2.84 percent with an average total of 0.40 in fees and points.
  4. The benchmark One Year ARM fell to 2.46 percent from 2.49 percent with an average total of 0.40 in fees and points.

pmms_chart 10

The uptick slowed refinance activity last week, according to the Mortgage Bankers Association. The volume of refinances dropped eight percent from the previous week, while purchases increased in a one percent in the busiest time of year for home buying and marking the highest level in home buyer activity since June 2013. Overall, however, the volume of mortgage applications fell 4.6 percent.

In other housing-related news, spending on construction of single-family homes continues to be a big disappointment as it fell 1.8 percent in March from the month before, according to the Commerce Department. Overall, construction spending declined 0.6 percent to a six-month low.

Tomorrow we’ll get the all-important report on employment for April, which is likely to create a big move in interest rates. If the report further supports something worse than transitory issues is stalling our economy I’d expect rates to stabilize near where they are right now. If we see positive news like a drop in unemployment that could set the stage for the Federal Reserve, which blamed the economy’s pullback on “transitory factors,” to raise the federal funds rate, a benchmark for mortgage rates.

Economists are expecting the addition of 220,000 jobs, up from March’s dismal 126,000 jobs. The unemployment rate is expected to decrease to 5.4 percent from 5.5 percent, but lately analysts haven’t been doing such a good job at guestimating the direction where the economy is going, so we’ll simply just have to wait and see what tomorrow brings.

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