Mortgage Interest Rates at lowest point in Two Years
Bonds remain attractive to investors as investors caution over the geopolitical stage.
When bonds rather than stocks perform, interest rates tend to fall. Home loan interest rate declined this week and are now at the lowest point in two years. Refinance mortgage application numbers have risen over the past month as homeowners take advantage of falling interest rates. If you purchase a home in the fall or winter of 2018 it might be possible to drop your interest rate up to 1%. 1% interest over thirty years can equate to a tremendous amount of savings. On the average loan amount of $200,000, borrowers may have the opportunity to save up to $80,000 over the life of their loan and lower their monthly payment over $100 a month.
The 30 year fixed rate mortgage average 3.82% in the week of June 13 according to Freddie Mac on Thursday. The interest rate now stands at a two year low. The data provided by Freddie Mac shows that current homeowners have an opportunity to save money but is slightly misleading in that 3.82% is only available to the most qualified home owners. Typically to obtain this interest rate a borrower would need to be in a 20% equity position in addition to having a FICO score above 720.
Average 30 Year Fixed Rate Mortgage Over One Year
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Typically, Fixed-rate mortgage interest rates follow the 10-year U.S. Treasury note yield, which has gone down as investors grow increasingly concerned about the economy and the potential for a trade war. When investors have confidence in the economy, they tend to invest in more high risk high yield investments like the stock market. When less money is invested in the bond market, bond yields increase to attract new investors. When more investors buy bonds, the bond yield decreases which, generally speaking, provides the relationship we see between bonds and mortgage rates.
On an extremely optimistic note, inflation has not had any major changes. Some analysts predict that the Federal Reserve will cut interest rates this year, which does have a relationship to inflation.
According to Freddie Mac, due to the lower interest rates, banks are reporting profit margins in the positive for the first time in a decade. Not surprisingly, the lack of available profits have caused many banks to exit the mortgage lending arena giving home buyers fewer options to finance their home.
Many blame over regulation for stifling profit and leading to more consumer pain with higher interest rates and fewer lending options available to them.
That same Freddie Mac Survey survey also found that for the first time in more than two years, a majority of lenders reported or said they expect refinance volumes to increase.
To insure lending is available to the average American it is important the lenders find mortgage lending profitable. As more and more lenders exit the mortgage industry the masses are starting to see the benefit of having profitable mortgage lenders in the market.
Some say that when banks cannot profit from mortgage lending they tend to reach with more risky loan programs. Unfortunately, with the current regulatory environment, even that is not an option for banks and mortgage companies. The only way to stop the bleeding for some banks was to leave the mortgage market all together.
Fannie Mae said in its release of the lender survey that “the meaningful easing of lending standards is a thing of the past.”
Translated – due to the current regulatory environment, the option to lower lending standards to prop up profitability is not an option. The results have been clear. More banks leaving the industry and the government scrambling to find a way to offer home loans to more Americans.
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