Mortgage rates continue to trend lower, with the rates now dropping to a 4-month low. Freddie Mac’s latest survey reported that the average fixed mortgage rates hit their lowest levels since June 2013 amid market speculation that the Federal Reserve will not taper its bond buying purchases this year.
According to Freddie Mac’s Primary Mortgage Market Survey for the week ending October 24, 2013:
-30-year fixed-rate mortgage (FRM) averaged 4.13 percent with an average 0.8 point for the week ending October 24, 2013, down from last week when it averaged 4.28 percent.
-15-year FRM averaged 3.24 percent with an average 0.6 point, down from last week when it averaged 3.33 percent.
-5-year adjustable-rate mortgage (ARM) averaged 3.00 percent with an average 0.4 point, down from last week when it averaged 3.07 percent.
In last 2 weeks, mortgage backed securities (MBS) have increased 150+ basis points in pricing. A rise in MBS prices mean lower mortgage rates. The weak employment report was the main reason for increase in MBS prices. Economists were expecting that the economy will add 193,000 jobs, but it added only 148,000 jobs. As a rule of thumb, bad economic news is good for mortgage rates and vice-a-versa.
Fed has kept the Mortgage rates artificially low for last few years. This has been achieved by Fed buying bonds and MBS. The reason for jump in mortgage rates during summer was mainly because the market thought Fed would taper that bond purchase. But with less than strong employment news, the market now does not expect for Fed to do that in 2013.
Outlook for Mortgage Rates: Rates should continue to remain low through the end of this year. However, there is a high likelihood of Fed tapering its bond purchase early next year. That will result in a higher rate.
The lower rates for next 2-3 months, open up a short window for refinancing, especially for borrowers who closed on their loans in last 3-4 months with higher rates. If you get at least a 0.25% better rate with little to no closing cost, refinancing is usually a good idea.
If you are in the market to get pre-approved contact me and I’ll get you in touch with one of our preferred lenders. The will provide you with your credit report and score, free of charge! Let me help get you on the path to home ownership.
October 29, 2013
by Shashank Shekhar
- Mortgage rates cool off (bizjournals.com)
- 30-year fixed-rate mortgage slides: Freddie Mac (marketwatch.com)
- About-face for mortgage rates (bizjournals.com)
- Mortgage rates declined substantially last week (hsh.com)
Categories: Purchasing a Home