October 29th, 2013
After two weeks of minor increases and a government shutdown, fixed mortgage rates have fallen once more.
According to Freddie Mac’s weekly Primary Mortgage Market Survey, current rates are at a four-month low. Average 30-year fixed-rate mortgages dropped to 4.13 percent for the week ending Oct. 24. At the end of the previous week, the average was at 4.28 percent. Similarly, 15-year FRMs fell to an average of 3.24 percent, which was a decrease of 0.09 percent from the week prior.
Treasury-indexed adjustable-rate mortgages also experienced a decline. Five-year Treasury-indexed hybrid ARMs went down to 3 percent, and 1-year Treasury-indexed ARMs fell to 2.6 percent.
“Mortgage rates slid this week as the partial government shutdown led to market speculation that the Federal Reserve will not alter its bond purchases this year,” stated Frank Nothaft, vice president and chief economist at Freddie Mac. “The weak employment report for September added to this expectation. The economy added just 148,000 jobs, which was below the market consensus forecast and less than the 193,000 jobs increase in August.”
Proposed changes to the Fed’s monthly bond-buying have been heavily watched, as tapering of the program is expected to raise interest rates. Until then, rates will remain low and favorable to homebuyers.
More good news for potential buyers
In addition to the good news of lower mortgage rates, the Federal Housing Finance Agency will not be making changes to loan limits until the spring.
Reuters reported that the FHFA wants to have a gradual transition to prevent an impediment of current housing growth. The changes to Fannie Mae and Freddie Mac loan caps were expected to commence on Jan. 1, 2014. However, rapid implementation of lower loan limits would have proved too much for sustainable housing market recovery.
FHFA Acting Director Edward DeMarco has stated that any adjustments will take place over time.
A delay to the changes bodes well for buyers, as lowering the cap will ramp up the difficulty of getting a home loan. U.S. government officials want to eventually remove all federal backing of mortgages through Fannie Mae and Freddie Mac, which could be detrimental if private investors are not willing to assume the risk.
Potential buyers can take heart that the FHFA is working to prevent any hardships when the changes occur.