Tuesday, June 23, 2009
Friday, June 19, 2009
Thursday, June 18, 2009
US 30-year mortgage rate jumped on Thursday-Zillow
By Julie Haviv
NEW YORK, June 18 (Reuters) - Interest rates on U.S. 30-year fixed-rate mortgages rose to 5.57 percent late Thursday after hovering around 5.47 percent on Wednesday, according to real estate Website Zillow.com.
But that is down sharply from a week earlier when the mortgage rate was around 5.76 percent, according to Zillow Mortgage Marketplace.
The higher rates reflect a rise in yields on U.S. government bonds, which are linked to the mortgage market.
The rate, however, is sharply higher than the roughly 5.00 percent level seen at the end of May and at the beginning of this year, Zillow said.
Home loan refinancing activity has dropped precipitously in recent weeks. A move higher in mortgage rates should further dampen demand.
Lawrence J. White, professor of economics at New York University's Stern School of Business, said that higher mortgage rates are certainly an impediment to a U.S. housing market recovery, but other factors are also suppressing demand.
"People are worried about the overall economy, how secure their jobs are as well as their overall financial status," he said.
"So, while higher mortgage rates matter, they are not the sole driver of housing demand," he said.
The battered U.S. housing market, which is in the midst of its worst downturn since the Great Depression, is both the source of and a major casualty of the credit crisis.
A setback for the market could hamper a turnaround of the U.S. economy.
NEW YORK, June 18 (Reuters) - Interest rates on U.S. 30-year fixed-rate mortgages rose to 5.57 percent late Thursday after hovering around 5.47 percent on Wednesday, according to real estate Website Zillow.com.
But that is down sharply from a week earlier when the mortgage rate was around 5.76 percent, according to Zillow Mortgage Marketplace.
The higher rates reflect a rise in yields on U.S. government bonds, which are linked to the mortgage market.
The rate, however, is sharply higher than the roughly 5.00 percent level seen at the end of May and at the beginning of this year, Zillow said.
Home loan refinancing activity has dropped precipitously in recent weeks. A move higher in mortgage rates should further dampen demand.
Lawrence J. White, professor of economics at New York University's Stern School of Business, said that higher mortgage rates are certainly an impediment to a U.S. housing market recovery, but other factors are also suppressing demand.
"People are worried about the overall economy, how secure their jobs are as well as their overall financial status," he said.
"So, while higher mortgage rates matter, they are not the sole driver of housing demand," he said.
The battered U.S. housing market, which is in the midst of its worst downturn since the Great Depression, is both the source of and a major casualty of the credit crisis.
A setback for the market could hamper a turnaround of the U.S. economy.
More fixed-rate mortgages go up
More big lenders have increased the cost of their fixed-rate mortgages for new borrowers.
The Abbey, the UK's second biggest mortgage lender, has put up the cost of its fixed-rate deals by between 0.25% and 0.5%.
Lloyds banking group has also made some of its fixed-rate deals more expensive.
The trend started last week when the Nationwide building society raised the cost of all its fixed-rate home loans by up to 0.86%.
The main factor behind the changes has been the increasing cost of swap rates.
These are the fixed rates at which banks and building societies borrow money from each other, for specified periods of time, to fund these particular mortgage deals.
"Swap rates have increased substantially in May and June and in particular last week," said Nici Audhlam-Gardiner, director of mortgages for the Abbey and the Alliance & Leicester, both run by the Spanish bank Santander.
"Following competitor moves and further swap rate increases, it has become necessary to increase the rates on some of the deals we offer," she added.
Going up
Other lenders which have taken similar steps recently are the Woolwich (part of Barclays), Northern Rock, Cheltenham & Gloucester (part of Lloyds) and the Halifax (also now part of Lloyds).
Fixed-rate deals have become very popular again in the past few months.
During April 69% of all new home loans were at fixed-rates, according to the Council of Mortgage Lenders (CML).
With the Bank of England's Bank rate still at a record low of just 0.5%, the expectation is that the official cost of borrowing can only go up when it is next changed. Some suggest therefore it may now be a good time to fix the cost of a home loan.
"People thinking of taking out a fixed-rate should not delay, but should move as quickly as possible," said Melanie Bien, of mortgage brokers Savills Private Finance.
"I think rates will go higher still."
According to the financial information service Moneyfacts, the average cost of a two-year fixed-rate loan, for someone with a 25% deposit, is currently 4.28%.
For borrowers who can only put down a 10% deposit the average rate is higher at 6.06%.
The Abbey, the UK's second biggest mortgage lender, has put up the cost of its fixed-rate deals by between 0.25% and 0.5%.
Lloyds banking group has also made some of its fixed-rate deals more expensive.
The trend started last week when the Nationwide building society raised the cost of all its fixed-rate home loans by up to 0.86%.
The main factor behind the changes has been the increasing cost of swap rates.
These are the fixed rates at which banks and building societies borrow money from each other, for specified periods of time, to fund these particular mortgage deals.
"Swap rates have increased substantially in May and June and in particular last week," said Nici Audhlam-Gardiner, director of mortgages for the Abbey and the Alliance & Leicester, both run by the Spanish bank Santander.
"Following competitor moves and further swap rate increases, it has become necessary to increase the rates on some of the deals we offer," she added.
Going up
Other lenders which have taken similar steps recently are the Woolwich (part of Barclays), Northern Rock, Cheltenham & Gloucester (part of Lloyds) and the Halifax (also now part of Lloyds).
Fixed-rate deals have become very popular again in the past few months.
During April 69% of all new home loans were at fixed-rates, according to the Council of Mortgage Lenders (CML).
With the Bank of England's Bank rate still at a record low of just 0.5%, the expectation is that the official cost of borrowing can only go up when it is next changed. Some suggest therefore it may now be a good time to fix the cost of a home loan.
"People thinking of taking out a fixed-rate should not delay, but should move as quickly as possible," said Melanie Bien, of mortgage brokers Savills Private Finance.
"I think rates will go higher still."
According to the financial information service Moneyfacts, the average cost of a two-year fixed-rate loan, for someone with a 25% deposit, is currently 4.28%.
For borrowers who can only put down a 10% deposit the average rate is higher at 6.06%.
Mortgage loan types
There are many types of mortgages used worldwide, but several factors broadly define the characteristics of the mortgage. All of these may be subject to local regulation and legal requirements.
Interest: interest may be fixed for the life of the loan or variable, and change at certain pre-defined periods; the interest rate can also, of course, be higher or lower.
Term: mortgage loans generally have a maximum term, that is, the number of years after which an amortizing loan will be repaid. Some mortgage loans may have no amortization, or require full repayment of any remaining balance at a certain date, or even negative amortization.
Payment amount and frequency: the amount paid per period and the frequency of payments; in some cases, the amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.
The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM) (also known as a floating rate or variable rate mortgage). In many countries, floating rate mortgages are the norm and will simply be referred to as mortgages; in the United States, fixed rate mortgages are typically considered "standard." Combinations of fixed and floating rate are also common, whereby a mortgage loan will have a fixed rate for some period, and vary after the end of that period.
In an adjustable rate mortgage, the interest rate is generally fixed for a period of time, after which it will periodically (for example, annually or monthly) adjust up or down to some market index. Common indices in the U.S. include the Prime rate, the London Interbank Offered Rate (LIBOR), and the Treasury Index ("T-Bill"); other indices are in use but are less popular.
Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where fixed rate funding is difficult to obtain or prohibitively expensive. Since the risk is transferred to the borrower, the initial interest rate may be from 0.5% to 2% lower than the average 30-year fixed rate; the size of the price differential will be related to debt market conditions, including the yield curve.
Additionally, lenders in many markets rely on credit reports and credit scores derived from them. The higher the score, the more creditworthy the borrower is assumed to be. Favorable interest rates are offered to buyers with high scores. Lower scores indicate higher risk for the lender, and higher rates will generally be charged to reflect the (expected) higher default rates.
A partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding principal balance is due at some point short of that term. This payment is sometimes referred to as a "balloon payment" or bullet payment. The interest rate for a balloon loan can be either fixed or floating. The most common way of describing a balloon loan uses the terminology X due in Y, where X is the number of years over which the loan is amortized, and Y is the year in which the principal balance is due.
Other loan types:
Balloon mortgage
Blanket loan
Bridge loan
Budget loan
Buydown mortgage
Commercial loan
Endowment mortgage
Equity loan
Flexible mortgage
Foreign National mortgage
Graduated payment mortgage loan
Hard money loan
Jumbo mortgages
Offset mortgage
Package loan
Participation mortgage
Reverse mortgage
Repayment mortgage
Seasoned mortgage
Term loan or Interest-only loan
Wraparound mortgage
Negative amortization loan
Non-conforming mortgage
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