With the recent spike in 10-year treasury yields, mortgage rates have climbed as well. If you needed to (or were able to) refinance, you should have done it three to six months ago. Courtesy of Bankrate and Bloomberg, here is a Table of Mortgage Rates that shows just that.

click on table for sharper image

The table shows 30-year fixed mortgage rates are close to a 1-year high, up .27 from a month ago, up .69 from three months ago, and up .57 from six months ago.

The “sweet spot” in refinancing was 3-6 months ago.

Mortgage Applications Fall as Rates Rise

Bloomberg reports Mortgage Rates for U.S. Loans Rise to 10-Month High

U.S. mortgage rates climbed to a 10- month high, reducing affordability for homebuyers as the housing market struggles to recover from depressed levels.

Mortgage rates are rising along with yields on the benchmark 10-year Treasury note, which reached a nine-month high this week. The increase in borrowing costs from record-low levels in November may reduce demand for purchases as the market enters its key spring selling season.

“It will have a slight dampening impact on homebuying,” Paul Dales, senior U.S. economist for Capital Economics Ltd. in Toronto, said in a phone interview. “Mortgage rates around 5 percent are still very low by historical standards, but these increases do seem to be putting people off.”

Mortgage applications fell for the second time in three weeks, a Mortgage Bankers Association index showed yesterday. The group’s gauge of purchases decreased 1.4 percent in the week ended Feb. 4, and its refinancing measure dropped 7.7 percent.

Mounting foreclosures and 21 months of unemployment of at least 9 percent are reducing buyer confidence in the housing market. Home prices fell in almost half of U.S. cities in the fourth quarter, the National Association of Realtors said today.

The rate for a 30-year fixed mortgage reached 4.17 percent in November, the lowest in Freddie Mac data going back three decades. The increase in borrowing costs has pushed the monthly cost for a $300,000 home loan to $1,620 from $1,462.

Rates may not have an effect on homebuying until they reach about 6 percent, said Tom Tzitzouris, head of the fixed-income department at Strategas Research Partners in New York. The current levels are a “neutral zone” where purchasers are neither pushed to buy nor discouraged from the market, he said.

NAR Whines in Favor of Continued Government (Taxpayer) Support of Fannie and Freddie

In a 100% completely expected whine, the NAR says GSE Structures Must Protect Taxpayers and Ensure Mortgage Availability

Continued government participation in the secondary mortgage market is essential to ensuring affordable and available home mortgages to qualified consumers when private lenders withdraw from the market, according to the National Association of Realtors®’ recommendations for restructuring the government-sponsored enterprises (GSEs).

“As the leading advocate for home ownership, NAR believes that the federal government must continue to play a role in the mortgage markets to ensure the steady flow of safe and affordable mortgage funding that middle-class consumers need, and only the government can provide that backing,” said NAR President Ron Phipps, broker-president of Phipps Realty in Warwick, R.I.

NAR believes the previous structure of Fannie Mae and Freddie Mac with private profits and taxpayer loss must never recur; however, without some level of government backing of the most basic, simple mortgages – such as the 30-year fixed rate product – interest rates and mortgage fees will be notably higher for consumers and could severely restrict access to credit, especially during down or disruptive markets. The recent economic downturn, for example, caused private capital to flee the marketplace; government backing of residential mortgages was critical in providing capital to borrowers and without their support the financial crisis could have been far worse.

NAR encourages private market solutions and innovations such as covered bonds for less traditional mortgages. However, a full privatization across all mortgage products will inevitably put taxpayers at risk. Given the very high concentration in the banking industry, the market will be vulnerable to tacit collusion and too-big-to-fail mistakes.

Thoughts on “Affordable Housing”

If you are sick of the incessant, hypocritical whining by the NAR, you are not the only one. I say “*” the NAR.

Full privatization is the only way to ensure taxpayers are never again put at risk by clowns whose message is always and forever “There’s never a better time to buy than now.”

Indeed, anything less than full privatization of mortgages by definition puts taxpayers at risk.

The fact is, Government has no business promoting housing. President Bush’s preposterous “Ownership Society” contributed to this mess.

I am in favor of eliminating all tax breaks to home buyers and on mortgages. In fact, I am in favor of eliminating all tax breaks on everything, instead lowering rates across the board.

One of the reasons we do not have “affordable housing” is hypocrites like the NAR and hypocrites on the take like Congressman Barney Frank have sponsored hundreds of bills allegedly for “affordable housing” that do everything imaginable to promote housing, thus guaranteeing prices stay unaffordable.

Look at the hypocrites now, wanting to stabilize prices. The best thing that could happen for those truly in favor of “affordable housing” would be for prices to fall another 20-30%.

Moreover, if home prices fell to affordable levels, buyers would step up to the plate and sales would soar (and so would overall commissions). Ironically, the dunces at the NAR fear falling home prices even though falling home prices are the solution, not the problem.

Mike “Mish” Shedlock
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