Archive for 30-Year Fixed
The Federal Reserve Meets Today : Mortgage Rates Expected To Move
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The Federal Open Market Committee adjourns from a scheduled 2-day meeting today, its first of 8 scheduled meetings this year.
The FOMC is a designated, rotating, 12-person committee within the Federal Reserve, led by Federal Reserve Chairman Ben Bernanke. Members of the FOMC sub-committee are the voting members of the Federal Reserve; the ones that ultimately determine U.S. monetary policy.
The most well-known Federal Reserve monetary policy tool is the central bank’s Fed Funds Rate. The Fed Funds Rate is the prescribed interest rate at which banks borrow money from each other for a period of one night.
The Fed Funds Rate can only be changed by FOMC vote.
For home buyers and would-be refinancing households in Delavan , it’s important to recognize that the Fed Funds Rate is an interest rate separate and distinct from “mortgage rates”. Mortgage rates are not voted upon by the Federal Reserve. Rather, mortgage rates are based on the price of mortgage-backed bonds, a security bought and sold among investors.
Historically, there is little correlation between the Fed Funds Rates and 30-year fixed rate mortgage rates throughout Wisconsin. Going back 20 years, the benchmark rates have been separated by as much as 5.29% and have been as near as 0.52%.
The spread has even gone negative, most recently in 1979 and 1981 — a period marked by high inflation.
Today, the separation between the Fed Funds Rate and the average, 30-year fixed rate mortgage rate is roughly 3.60%. Beginning at 12:30 PM ET, however, that spread is expected to change. The FOMC will make its statement to the press at that time, and will release its quarterly forecast to the markets.
As Wall Street reacts to the Fed’s press release and projections, mortgage rates will move.
Investors expect the Fed to vote the Fed Funds Rate unchanged from its current range near 0.000 percent, but are unsure of how the Fed will characterize the U.S. economy. If the Fed speaks optimistically on the economy, stock markets should rise and mortgage bonds should fall, driving mortgage rates higher.
Conversely, if the Fed shows concern for future economic growth, mortgage rates should drop. Either way, today figures to be volatile one for mortgage markets.
When mortgage markets get volatile, the safe play as a rate shopper is to lock your mortgage rate immediately. There too much risk in floating.
Mortgage Payments Fall 12% Since February 2011
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As mortgage rates drop, so do housing payments. It’s a good time to consider refinancing your home, or making an offer on a new one. Mortgage payment affordability has never been so high in history.
According to Freddie Mac, the average 30-year fixed rate mortgage rate is now 3.94 percent – an all-time low – with an accompanying 0.8 discount points. This means that in order to get access to the 3.94 percent rate, Lake Geneva real estate homeowners and home buyers should expect to pay a loan fee equal to 0.8% of the borrowed amount, plus “normal” closing costs.
Last week, the average 30-year fixed rate mortgage rate was 3.99 percent with an accompanying 0.7 discount points.
Mortgage rates in Wisconsin have been in decline for most of the year. Since peaking in early-February, the average home owner’s principal + interest payment on a 30-year fixed rate mortgage had now dropped by 12.2 percent.
Here is how mortgage payments compare, then and now, not accounting for your individual tax-and-insurance escrow :
- February 10, 2011 : Payment of $539.88 per $100,000 borrowed
- December 15, 2011 : Payment of $473.96 per $100,000 borrowed
For existing homeowners, the dramatic drop in payments is reason to reach out to your loan officer. A refinance could save you tens of thousands of dollars over the life of your loan — especially if you chose to refinance your mortgage into a 15-year program.
The 15-year mortgage, says Freddie Mac, is also at an all-time low, registering 3.21 percent with 0.8 discount points, on average.
For home buyers, today’s low rates present an interesting opportunity.
Mortgage rates are the key factor in determining your monthly housing payment so, with average mortgage rates below 4 percent, it’s no wonder home affordability is cresting. However, the housing market is showing signs of recovery. Home supplies are dwindling, buyer demand is rising, and the economy appears to be mending.
Home prices are expected to rise in 2012 and, as they do, they’ll take housing payments with them. The best time to buy a home may be now; before the recovery completes.