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30-year mortgage rates below 4% for first time in 5 months – Orange County Register

What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take.

RATE NEWS SUMMARY

From Freddie Mac’s weekly survey: The 30-year fixed rate is under 4 percent for the first time since November, landing at a more affordable 3.97 percent. This is a staggering 11 basis points reduction from last week’s 4.08 percent. Ditto for the 15-year fixed, which averaged 3.23 percent, 11 basis points better than last week’s 3.34 percent.

The Mortgage Bankers Association reported a 1.8 percent decrease in loan application volume from the previous week.

BOTTOM LINE: Assuming a borrower gets the average 30-year fixed rate on a conforming $424,100 loan, last year’s rate of 3.59 percent and payment of $1,926 was $91 less than this week’s payment of $2,017.

WHAT I SEE: Locally, well qualified borrowers can get the following fully amortizing fixed-rate loans with zero cost: A 15-year at 3.25 percent, a 20-year at 3.75 percent, a 30-year at 3.875 percent, a Federal Housing Administration or Veterans Administration 30-year loan at 3.375 percent, a 15-year conventional high-balance loan (or a loan from $424,101 to $636,150) at 3.5 percent, a 30-year high-balance at 4.125 percent, an FHA/VA 30-year high-balance at 3.625 percent, a 15-year jumbo (loan amounts over $636,150) at 4.375 percent and a 30-year jumbo at 4.50 percent.

WHAT I THINK: The economy is contracting, not expanding.

Right after Donald Trump was elected president on Nov. 8, market euphoria about the expectations of economic growth, health care and tax reform ensued, and mortgage rates jumped a bunch.

Freddie Mac rates were 3.57 percent on Nov. 10. The Trump effect saw rates jump, hitting a high of 4.32 percent on Dec. 29.

Today Freddie stands at 3.97. Locally, the 30-year fixed mortgage is just three-eighths higher than election-day rates. And, the momentum points to lower rates ahead.

Truth serum: Interest rates tend to rise in a demanding, expanding economy. They don’t drop.

How about some other key indicators of a contracting economy? Retail sales are slowing.  Inflation is on the decline.  Employment growth momentum is losing steam.

Minutes from the March Fed meeting released this month indicate the Fed may start shedding assets from its balance sheet of approximately $4.5 trillion later this year. Named quantitative easing, about $2 trillion of this balance sheet was a result of the Fed buying mortgages from Fannie and Freddie during the height of the Great Recession to keep liquidity in the mortgage market.

Do you remember the “Taper Tantrum” back in 2013?  That’s when the Fed announced it was going to taper its bond buying program. It caused quite an upset in the bond market, pushing rates higher.

Now the Fed plans to resume tapering, even as it telegraphs telegraph its intention to raise short-term interest rates two more times this year.

“(Federal Reserve Chair Janet) Yellen is three years too late in raising rates,” said…

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