Lending Landscape - March 27, 2008

After a down week last week, mortgage rates were mixed this week seeing only slight movement in either direction. Fixed rates edged down 2 basis points -

The government-sponsored loan buyer said 30-year fixed-rate loans averaged 5.85% for the week ending Thursday, down from 5.87% last week.

Last year at this time, the 30-year rate averaged 6.16%, Freddie Mac said.

Short term rates on the other hand moved up despite a rate cut from the Fed last week -

Rates on five-year adjustable-rate mortgages (ARMs) averaged 5.67%, up from 5.56% last week. A year ago, the 5-year rate averaged 5.88%.

One-year Treasury-indexed ARMs averaged 5.24%, up from 5.15% last week. At this time a year ago, the 1-year ARM averaged 5.43%.

Credit standards for obtaining a loan tightened further as lenders determined standards for the new, higher loan limits. Both conforming standards and FHA were raised virtually eliminating no money down loans for borrowers with dicey credit.

With a smaller buyer pool eligible to buy homes, expect builders to offer even more attractive prices and bonuses on new homes.

Lending Landscape - March 6, 2008

Like the weather in the Salt Lake Valley, a spring thaw seems headed for the mortgage markets. Interest rates dropped, erasing last weeks gains.

The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.03% for the week ending Thursday, down from 6.24% last week.

Last year at this time, the 30-year rate averaged 6.14%, Freddie Mac said.

Freddie Mac also said 15-year fixed-rate loans averaged 5.47%, down from 5.72% last week. A year ago, the 15-year rate averaged 5.86%.

Short term rates have dropped as well and the Fed is widely expected to cut short term rates again when it next meets in March.

There was big news on Thursday when new loan limits for both conforming and FHA mortgages were released. Salt Lake City received the maximum allowed limit of $729,750 for both programs. The new limits are temporary, available only until the end of the year. The benefits to this change in Salt Lake will primarily be felt in houses above $400,000, where sales have slowed in the last nine months.

The benefits to the mortgage market as a whole will be felt once California homeowners start successfully refinancing homes in financial trouble and the mortgage lenders regain confidence.

A window of opportunity exists in the Salt Lake housing market as the benefits of lower interest rates, lower new home prices and higher loan limits will stimulate demand. All three of these factors will not co-exist for long.

Lending Landscape - February 28, 2008

The lending landscape is getting more muddled as long term mortgage rates continue to rise, despite efforts from the Federal Reserve board to keep them low. Over the past week, fixed rates have increased to levels we saw last November.

The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.24% for the week ending Thursday, up from 6.04% last week.

Last year at this time, the 30-year rate averaged 6.18%, Freddie Mac said.

Short term rates were up slightly this week, but are still far below last year's levels. In testimony to Congress this week, Fed chairman Ben Bernanke indicated willingness to cut rates further at the next meeting in March. This should provide additional downward pressure on adjustable rate mortgages.

The Fed has had great difficulty controlling long term rates. When they wanted higher rates, long term rates stubbornly held level. Now that they want lower rates, the trend is reversing. One thing is certain and that is the markets are volatile. Even though rates trended up last week, as of this writing they appear to be headed down.

For new home buyers in Utah it's important to consider that an adjustable rate mortgage may be of benefit given the downward trend in short term rates. Further, long close dates, particularly for new construction could possibly allow a clearer economic picture to emerge.

Lending Landscape - February 21, 2008

The lending landscape has seen fixed mortgage rates increase over the past week, while adjustable rates continue to decline after several rate cuts from the Federal Reserve Board. Even as fixed rates have moved up, they are still nearly a quarter point lower than last year.

The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.04% for the week ending Thursday, up from 5.72% last week.

Last year at this time, the 30-year rate averaged 6.22%, Freddie Mac said.

One-year Treasury-indexed ARMs averaged 4.98%, down from 5% last week. At this time a year ago, the 1-year ARM averaged 5.49%.

Fixed mortgage rates have been very volatile this year given the uneasiness about the economy and declines in the stock market. In Utah, new home sales have slowed considerably, but prices are holding ground. Builders are offering discounts and promotions unheard of in the market during the recent boom. In combination with lower interest rates, it's a very attractive time to buy a new home.

Lending Landscape - February 7, 2008

Mortgage rates continued to hover at near record level lows in the past week. Concerns for the economy should keep them at this level for some time to come.

The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 5.67% for the week ending Thursday, down from 5.68% last week, and still well below rates at this time last year Freddie Mac noted.

At this time last year, the 30-year fixed-rate mortgage averaged 6.28%, Freddie Mac said.

Congress approved a financial stimulus package that besides handing out cash, will raise the loan limits for conforming and FHA loans for six months this year. In combination with lower rates, this could allow new home buyers additional purchase power. While many new homes in Utah fall well within FHA ($366,000) and conforming ($417,000) loan limits, the temporarily higher limits could make stretching for a dream home worthwhile.

Lending Landscape - January 31, 2008

Mortgage rates bumped up slightly this week ahead of the Federal Reserve Board's interest rate decision. Improvements in the stock market sent prices of the benchmark 10 year bond lower which subsequently pushed 30 year rates higher.

The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 5.68% for the week ending Thursday, up from 5.48% last week, but still well below its historical average Freddie Mac noted.

At this time last year, the 30-year fixed-rate mortgage averaged 6.34%, Freddie Mac said.

Financial markets have been quite volatile this month, but mortgage rates appear to be leveling off. Short term mortgage rates are trending down under Fed guidance. More importantly, the Fed is bringing confidence to the housing market.

TV personality Jim Cramer wrote -

Cramer was -- to put it mildly -- vocal about his displeasure with the Fed's lack of response to the credit and housing woes that have gripped the markets since last summer. But now he's so confident in the economy he's considering buying what might be "the most loathed and toxic investment around": a house. The additional cut, which came just a week after another 75 basis-point emergency cut, has made a turnaround in housing "inevitable," he said.

Utah has been slow to feel the pain of the housing crisis, but the underlying problems in the mortgage industry affect every state. Lower rates and a slowing housing market in Utah have created opportunities for financing and builder discounts/incentives on new homes.

Lending Landscape - January 24, 2008

Mortgage rates have been on a roller coaster this week. Ultimately they ended up lower and economic policies revealed this week should continue to push them further down. On Tuesday the Federal Reserve Board cut short term interest rates in an emergency meeting by .75%. Concerns on the stock market sent mortgage rates plunging, though a recovery later in the week sent rates, roller coaster like, lower. In addition, short term rates have finally become lower than fixed rates.

Mortgage rates continued to fall this week, with 30-year and 15-year fixed-rate mortgages hitting their lowest levels in nearly four years, Freddie Mac reported Thursday.

The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 5.48 percent for the week ending Thursday, down from 5.69 percent last week.

At this time last year, the 30-year fixed-rate mortgage averaged 6.25 percent. The 30-year rate has not been lower since the week ending March 25, 2004, when it averaged 5.40 percent.

One-year Treasury-indexed ARMs averaged 4.99 percent, down from 5.26 percent last week. At this time a year ago, the 1-year ARM averaged 5.49 percent.

It's been a volatile week, indeed a volatile month with concerns in housing spilling over to other parts of the economy. Decisions made this week by the Fed in regards to interest rates and by the Federal government in regards to loan limits and FHA loan qualifications should stabilize the housing and lending markets.

The Salt Lake Tribune reported today -

Utah should be able to rely on steady job growth, which has slowed from 4.5 percent to 3.5 percent but is expected to remain among the most robust in the nation. "It's much better than any other state, and we're a long way from a negative situation," Matthews said.

Developments since this article was published should further stabilize the real estate market. Ultimately, lower rates and lower prices in the face of a slowing market present excellent opportunities to buy new housing in Utah now. Let's not forget that interest rates fluctuate on an hourly basis and remarkable opportunities present themselves to those that are prepared. In the past two days mortgage rates have adjusted up several times per day. Those who are prepared to act can benefit.

Recent activity by the Fed and Congress will significantly benefit new home buyers in Utah.