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20 March 2020 00:32

Bank of England Interest rate Finance

US mortgage rates climb this week; 30-year loan at 3.65%

FILE - This June 13, 2019, file photo shows a new home is for sale in Mechanicsville, Va. On Thursday, March 12, 2020, U.S. long-term mortgage rates were mixed this week after hitting all-time lows last week amid anxiety over risks to the economy from the deepening coronavirus crisis. WASHINGTON (AP) — U.S. long-term mortgage rates climbed this week in a whip-sawing market amid deepening anxiety over devastation to the economy from the coronavirus pandemic. Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year loan jumped to 3.65% this week from 3.36% last week. Freddie Mac said the short-term rise was due to mortgage lenders increasing prices to deal with booming demand for refinancing into loans at historically low rates. The recent decline trend in mortgage rates has been driven by investors shifting money out of the stock market and into the safety of U.S. Treasurys as the crisis in confidence around the global viral outbreak has worsened.

Long-term mortgage rates tend to track the yields on the 10-year Treasury note, so they typically fall in tandem. The record low mortgage rates have been a boon to potential homebuyers, and they give many homeowners an opening to refinance into lower-rate loans to free up money to spend or save. And ultra-low mortgage rates aren't likely to produce a significant rise in home sales this year because the supply of homes for sale remains at historic lows. Each week, Freddie Mac surveys lenders to compile its national mortgage rate figures. Housing: U.S. long-term mortgage rates climbed this week in a whip-sawing market amid deepening anxiety over devastation to the economy from the coronavirus pandemic.

Home loan rates had hit all-time lows two weeks ago. Mortgage buyer Freddie Mac reported today that the average rate on the benchmark 30-year loan jumped to 3.65% this week from 3.36% last week. The average U.S. fixed rate for a 30-year mortgage increased to 3.65% this week, as lenders seemingly inflated prices in an effort to deal with a surge in both refinance and purchase demand. While the rate sits 29 basis points above last week's level of 3.36%, it's still much lower than the 4.28% of the same week in 2019, according to Freddie Mac. "Mortgage rates rose again this week as lenders increased prices to help manage skyrocketing refinance demand.

"The ongoing situation around the coronavirus led to further stress in the financial markets late last week, with unprecedented volatility and widening spreads," said Joel Kan, MBA's associate vice president of economic and industry forecasting. According to Freddie Mac's survey, the 15-year FRM averaged 3.06% this week, increasing from last week's rate of 2.77%. The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.11% this week, up from last week's rate of 3.01%. "The Federal Reserve's rate cut and other monetary policy measures to help the economy should help to bring down mortgage rates in the coming weeks, spurring more refinancing," Kan said. Forecast plus what's driving mortgage rates today Market data affecting (or not) today's mortgage rates First thing this morning, markets and other factors provided few clues to what may happen to mortgage rates today.

() When investors are buying shares they're often selling bonds, which pushes prices of Treasurys down and increases yields and mortgage rates. But if they're not worried now … Oil prices fell to $21.79 a barrel from $24.01 (Good for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) fell to $21.79 a barrel from $24.01 (because energy prices play a large role in creating inflation and also point to future economic activity.) The yield on 10-year Treasurys rose to 1.10% from 1.05%.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently () More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently CNN Business Fear & Greed index nudged up to 6 from 5 out of a possible 100 points. (Bad for mortgage rates.) "Greedy" investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while "fearful" investors do the opposite. A few weeks ago, we were predicting that markets and mortgage rates could soon be bouncing up and down "like Tigger on E." We should have stuck with that simile. If the Fed's dramatic unveiling on Sunday of a massive rate cut (to close to zero) and $700-billion stimulus package ("quantitative easing") was intended to reassure investors, it didn't work.

So don't expect your lender to be offering you a lower rate as a direct result of Sunday's announcement. It may have worked on Monday and Tuesday but it sure didn't yesterday Excessive demand, mostly for refinances, was behind last week's sharp rises in mortgage rates. Lenders struggled to cope and investors didn't want to buy all the MBSs on offer when rates and yields were low. The seriousness of the Covid-19 outbreak and its likely economic consequences can be seen in headlines and announcements since we last published yesterday morning: Indeed, on March 2, the Organization for Economic Cooperation and Development (OECD) slashed its 2020 global growth forecasts to 1.5%, almost half the 2.9% it was expecting before Covid-19 took hold. The coronavirus likely halved China's economic growth in the current quarter compared with the previous three months, more severe than thought just three weeks ago and triggering expectations for earlier interest rate cuts. Unless the coronavirus magically disappears during the next few days, expect none of this week's reports to have much direct impact on mortgage rates. But, more normally, any economic report can move markets, as long as it contains news that's shockingly good or devastatingly bad — providing that news is unexpected. But this theory about stock market investors banking on the Fed to rescue them would certainly explain why major indexes were regularly hitting record highs amid so-so economic data and corporate results. What we do know is that mortgage rates have recently not been tracking yields on 10-year Treasurys as closely they usually do (see above for the probable reason). Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates. And here are their latest forecasts for the average rate for a 30-year, fixed-rate mortgage during each quarter (Q1, Q2 …) in 2020. Freddie Mac reckons that particular mortgage rate averaged 3.9% during 2019. So, if any of those experts' forecasts turn out to be right, it could be another good year for new mortgage borrowers — and for existing ones who want to refinance. Just don't expect zero or negative mortgage rates in America anytime soon. But don't think there isn't a wider price to pay for ultralow mortgage rates. The impacts of Covid-19 and the Fed's quantitative easing just might drag those rates to new lows sooner than currently seems likely. However, none of this means we expect you to lock on days when mortgage rates are actively falling. After all, current mortgage rates are at or near record lows and a great deal is assured. As a very general rule, good news tends to push mortgage rates up, while bad drags them down. Indeed, you should be more inclined to lock because any rises in rates could kill your mortgage approval. On the flip side, if a higher rate would wipe out your mortgage approval, you'll probably want to lock in even if it costs more. Mortgage interest rates depend a great deal on the expectations of investors. Good economic news tends to be bad for interest rates because an active economy raises concerns about inflation. And that's why, when demand for bonds increases and bond prices go up, interest rates go down. Interest rates on home loans shot up higher over the past week as demand for refinances remained strong despite major fluctuations in stock and bond markets. The 30-year fixed-rate mortgage averaged 3.65% during the week ending March 19, an increase of 29 basis points from the previous week, Freddie Mac FMCC, -0.60% reported Thursday. The noted uptick in 30-year fixed-rate mortgage rates is a major reversal from just two weeks ago, when they had hit a record low at an average of 3.29%. Read more:The Fed cut interest rates to zero, but don't expect to see 0% mortgages anytime soon "Knowing that more bonds will be in the market soon, current Treasuries suddenly warranted lower prices in recent days, which coincide with higher yields." Meanwhile, lenders continued to have their own issues to grapple with when it came to pricing mortgage rates this week. "Mortgage rates rose again this week as lenders increased prices to help manage skyrocketing refinance demand," said Sam Khater, Freddie Mac's chief economist, in the report.