Home Loan Interest Rates Keep Increasing

For the fourth consecutive week, mortgage rates continued to climb as home buyers face higher borrowing costs. But, mortgage applications for home purchases have managed to increase.

“Mortgage rates are drifting upwards again and represent continued affordability challenges for prospective buyers—especially first-time buyers,” says Sam Khater, Freddie Mac’s chief economist. “Borrowing costs are moving right now for three main reasons: the very strong economy, higher U.S. government debt issuances, and global trade tensions.”

Freddie Mac reports the following national averages for the week ending Sept. 20:

  • 30-year fixed-rate mortgages averaged 4.65 percent, with an average 0.5 point, rising from last week’s 4.6 percent average. Last year at this time, 30-year rates averaged 3.83 percent.
  • 15-year fixed-rate mortgages averaged 4.11 percent, with an average 0.5 point, increasing from last week’s 4.06 percent average. A year ago, 15-year rates averaged 3.13 percent.
Source: Freddie Mac

Down Payments Jump to Record Highs

Home buyers are putting more money down on a home purchase than ever before. The size of down payments during the second quarter climbed to a median of $19,900, a record high, according to ATTOM Data Solutions’ research, which dates back to the first quarter of 2000. What’s more, this marks a 19 percent jump from $16,750 in this year’s first quarter.

The median down payment was 7.6 percent of the median sales price of homes purchased with finances during the second quarter, according to the report. That percentage is at a nearly 15-year high. California buyers tend to bring the highest down payments.
Source: “U.S. Refinance Originations Drop to Four-Year Low in Q2 2018,” ATTOM Data Solutions (Sept. 11, 2018

Mortgage Interest Rates Jump to 6-Week High

A strong job market and consumer credit are driving up mortgage rates for the third consecutive week and now to their highest level in six weeks. Mortgage rates are 0.82 percent higher than a year ago—the largest year-over-year increase since May 2014, Freddie Mac reports.

Despite the higher rates, Sam Khater, Freddie Mac’s chief economist, expects buyer demand to remain high. “This spectacular stretch of solid job gains and low unemployment should help keep home buyer interest elevated,” Khater says. “However, mortgage rates will likely also move up, as the Federal Reserve considers short-term rate hikes this month and at future meetings.”

Freddie Mac reports the following national averages for the week ending Sept. 13:

  • 30-year fixed-rate mortgages: averaged 4.60 percent, with an average 0.5 point, up from last week’s 4.54 percent average. Last year at this time, 30-year rates averaged 3.78 percent.
  • 15-year fixed-rate mortgages: averaged 4.06 percent, with an average 0.5 point, climbing from last week’s 3.99 percent average. A year ago, 15-year rates averaged 3.08 percent.
Source: Freddie Mac

Most Buyers Seek Financing Before Showings

The first step buyers most often take in their home shopping pursuit is to check up on financing and to make sure they can even afford a home, according to a new survey of 1,000 recent buyers. The survey was commissioned by loanDepot and mellohome, a real estate services provider. The majority of these customers—nearly 74 percent—sought financing first in their homebuying journey before looking at homes. For first-time buyers, that percentage jumps to 85 percent.

“This is definitely a shift from 10 years ago,” says Chris Heller, CEO of mellohome. “It emphasizes how customers are changing their approach to home buying. In the past, they relied on a real estate agent to drive the entire process. Now the customer is taking charge and doing a lot of the groundwork before they even get an agent involved.”

Heller says that buyers are learning that getting their financing in check upfront can better prepare them to shop for a home “with confidence and puts them in a more advantageous, competitive position, especially in tight markets.” A preapproval letter for financing can help when they go to make an offer, he says.

Home Loan Interest Rates Inch Up

Mortgage rates rose slightly for the second consecutive week, and economists warn that more rises are likely to come. Mortgage rates are now up three-quarters of a percentage point from last year.

“Borrowing costs may be slowly on the rise again in coming weeks, as investors remain optimistic about the underlying strength of the economy,” says Sam Khater, Freddie Mac’s chief economist. Home prices have been rising too—although at a slower pace recently—but are still “outrunning rising inflation and incomes,” Khater notes. “The weakening in affordability is hindering many interested buyers this fall, even as the robust economy brings them into the market.”

Freddie Mac reports the following averages for the week ending Sept. 6:

  • 30-year fixed-rate mortgages: averaged 4.54 percent, with an average 0.5 point for the week, increasing from last week’s 4.52 percent average. Last year at this time, 30-year rates averaged 3.78 percent.
  • 15-year fixed-rate mortgages: averaged 3.99 percent, with an average 0.4 point, increasing from last week’s 3.97 percent average. A year ago, 15-year rates averaged 3.08 percent.
Source: Freddie Mac

Home Loan Approval with a Lower Credit Score

New mortgages are being approved with lower credit scores, and FHA loans appear to be leading the shift, according to studies by credit developer FICO and other entities. “As we get further away from the Great Recession, underwriting criteria seems to have eased, and a broader section of consumers are obtaining mortgages as a result,” according to FICO’s report.

From January to March of this year, borrowers who were approved for FHA loans—which offer low down payment options for first-time home buyers—had an average credit score of 672, according to FHA data. During that same period in 2011, the average credit score for an FHA borrower was 701. FHA borrowers also have had higher debt-to-income ratios in recent years. Debt-to-income ratios measure monthly household income against other debt, such as credit cards, auto loans, and personal loans.

Mortgage Interest Rates ‘Mostly Holding Steady’

Mortgage rates haven’t been this stable since the fall of 2016. Rates did inch up this week, but only slightly and are still offering prospective buyers a window of opportunity, says Sam Khater, Freddie Mac’s chief economist.

The recent slowdown in price appreciation in several markets, mixed with these steady mortgage rates, is “good news” for many prospective buyers who may have been priced out earlier this year. “Given the strength of the economy, it is possible for home sales to pick up even more before year’s end,” Khater says. “The key factor will be if affordably priced inventory increases enough to continue this recent trend of cooling price appreciation.”

Freddie Mac reports the following national averages for the week ending Aug. 30:

  • 30-year fixed-rate mortgages: averaged 4.52 percent, with an average 0.5 point, rising from last week’s 4.51 percent average. Last year at this time, 30-year rates averaged 3.82 percent.
  • 15-year fixed-rate mortgages: averaged 3.97 percent, with an average 0.5 point, falling from last week’s 3.98 percent average. A year ago, 15-year rates averaged 3.12 percent.
Source: “Mortgage Rates Tick Up,” Freddie Mac (Aug. 30, 2018)

Home Loan Interest Rates ‘Continue to Decline’

Borrowers continued to get relief with mortgage rates this week, as the 30-year fixed-rate mortgage sank lower for the third consecutive week. Mortgage rates are now at their lowest level since April.

“Backed by very strong consumer spending, the economy is red-hot this month, which is in turn rippling through the financial markets and driving equities higher,” says Sam Khater, Freddie Mac’s chief economist. “It is clear affordability constraints” have cooled the housing market, particularly in expensive coastal markets. “Many metro areas desperately need more new and existing affordable inventory to break out of this slump,” he notes.

Freddie Mac reports the following national averages for the week ending Aug. 23:

  • 30-year fixed-rate mortgages: averaged 4.51 percent, with an average 0.5 point, falling from last week’s 4.53 percent average. Last year at this time, 30-year rates averaged 3.86 percent.
  • 15-year fixed-rate mortgages: averaged 3.98 percent, with an average 0.5 point, falling from last week’s 4.01 percent average. A year ago, 15-year rates averaged 3.16 percent.
Source: “Mortgage Rates Maintain Downward Trend,” Freddie Mac (Aug. 23, 2018)

 

Mortgage Rates Ease for Second Week

Borrowers had slightly more relief with mortgage rates again this week. The 30-year fixed-rate mortgage rate dipped again, averaging 4.53 percent, Freddie Mac reports.

“The stability in borrowing costs comes despite the highest core inflation rates since 2008 and turbulence in the currency markets,” says Sam Khater, Freddie Mac’s chief economist. “Unfortunately, this pause in rates is not leading to increasing home sales.”

Freddie Mac reports the following national averages for the week ending Aug. 16:

  • 30-year fixed-rate mortgages: averaged 4.53 percent, with an average 0.5 point, falling from last week’s 4.59 percent average. Last year at this time, 30-year rates averaged 3.89 percent.
  • 15-year fixed-rate mortgages: averaged 4.01 percent, with an average 0.5 point, dropping from last week’s 4.05 percent average. A year ago, 15-year rates averaged 3.16 percent.
Source: “Mortgage Rates Step Back,” Freddie Mac (Aug. 16, 2018)

Millions of Consumers Getting a Credit Score Boost

An overhaul in how several major credit reporting agencies factor in negative credit information is prompting millions of consumers’ credit scores to rise. Collection events were struck from 8 million consumers’ credit reports in the 12 months ending in June. The New York Federal Reserve reported Tuesday that consumers who had at least one collections account removed from their credit reports are seeing an 11-point increase to their scores.

Critics have long claimed such dings to scores are prone to errors or that they’ve unfairly kept many out of the borrowing market. Equifax, Experian PLC, and TransUnion have all agreed to revamp reports, which stems from a 2015 settlement with state attorneys general on the matter. In the settlement, the firms agreed to remove some non-loan related items that were sent to collection firms, such as gym memberships, library fines, and traffic tickets. They also agreed to strike medical-debt collections that have been paid by a patient’s insurance company.

Source: “Overhaul Boosts Credit Scores of Millions of U.S. Consumers,” The Wall Street Journal (Aug. 15, 2018)