Thanksgiving mortgage market
December 6, 2013
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In the weeks surrounding the Thanksgiving holiday, the mortgage market appears to have taken its own holiday, experiencing a slowdown as mortgage rates inched up.
Mortgage rates rise
Federal Reserve officials are scheduled to have their monthly meeting on Dec. 17 and 18 to discuss quantitative easing, the fiscal policy that has held mortgage rates artificially low in order to stimulate economic growth and help the housing market recover from the recession. Its current spending is at a rate of $85 billion per month in U.S. Treasury bonds, an unsustainable pace. Officials at the Central Bank have made it clear they will not begin to reduce spending until the economy has proven to be strong enough to grow without stimulus spending. One factor that will help Fed officials make a decision is the upcoming employment report.
Federal Reserve officials are scheduled to have their monthly meeting on Dec. 17 and 18 to discuss quantitative easing, the fiscal policy that has held mortgage rates artificially low in order to stimulate economic growth and help the housing market recover from the recession. Its current spending is at a rate of $85 billion per month in U.S. Treasury bonds, an unsustainable pace. Officials at the Central Bank have made it clear they will not begin to reduce spending until the economy has proven to be strong enough to grow without stimulus spending. One factor that will help Fed officials make a decision is the upcoming employment report.
The mortgage market has seen volatile changes over the last year in reaction to the Federal Reserve's plans. In anticipation of the December meeting and November employment report, interest rates inched up over the Thanksgiving holiday. Mortgage News Daily reported that mortgage rates had risen on the Monday following Thanksgiving to their highest level in two months, reaching 4.5 percent for a 30-year fixed-rate loan. During the same time last year, mortgage rates averaged 3.36 percent.
According to CNBC, most economists believe the Fed will decide not to reduce its bond-buying in December, but will wait until later in 2014 when the unemployment level falls to 6.5 percent. However, if nonfarm payrolls are strong, the decision is likely to come sooner, potentially this in December. Mortgage rates are expected to rise close to 5 percent when the Fed begins to taper quantitative easing, though the increase should strengthen the housing market. Artificially low rates have helped the housing market recover, but the levels are unsustainable in the long term.
Jumbo loans, those larger than the conforming loan limit of $417,000, also had a spike in interest rates, CNBC reported. The average rate increased to 4.49 percent, just below the average for a conforming loan.
Applications on holiday
At the same time as mortgage rates bumped up slightly over the holiday, applications declined, according to the Mortgage Bankers Association. Applications for a new home purchase fell 4 percent compared to the previous week, CNBC reported. The mortgage refinance sector declined the most, with a drop of 18 percent, marking the lowest level since the beginning of September. Though mortgage rates were up, the drop in activity is largely attributed to the holiday.
At the same time as mortgage rates bumped up slightly over the holiday, applications declined, according to the Mortgage Bankers Association. Applications for a new home purchase fell 4 percent compared to the previous week, CNBC reported. The mortgage refinance sector declined the most, with a drop of 18 percent, marking the lowest level since the beginning of September. Though mortgage rates were up, the drop in activity is largely attributed to the holiday.
"Essentially, the very short work week had a significant impact on the number of applications," MBA Spokesman Shawn Ryan told CNBC. "Interest rates were up slightly and that pushed down on refinances, but we attribute the size of the drop mainly to the holiday."
Delinquencies decline
While the mortgage market appears to be experiencing a slight stall in activity in anticipation of upcoming economic data, the overall health of the housing market has improved. According to a survey by the Mortgage Bankers Association, mortgage delinquencies for commercial and multifamily real estate declined in the third quarter of 2013. Fewer delinquencies reveals that the housing market has grown stronger since the depths of the recession.
While the mortgage market appears to be experiencing a slight stall in activity in anticipation of upcoming economic data, the overall health of the housing market has improved. According to a survey by the Mortgage Bankers Association, mortgage delinquencies for commercial and multifamily real estate declined in the third quarter of 2013. Fewer delinquencies reveals that the housing market has grown stronger since the depths of the recession.
"Commercial and multifamily mortgage performance continues to reflect overall economic gains," said Jamie Woodwell, vice president of commercial real estate research at MBA. "Improvements in underlying property performance and property values, and the continued availability of commercial and multifamily mortgage financing, led to declines in delinquency rates for every major investor group."
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