Mortgage Rates Lowest Ever, Woo.

Last updated on December 19th, 2017


About a month ago, I discussed whether mortgage rates could drop any lower. At that time, the en vogue 30-year fixed-rate mortgage averaged 4.32%, per Freddie Mac data.

Today, expectedly, it hit a fresh all-time low, falling to 4.12%. Freddie attributed it to “market concerns over Eurozone sovereign debt default and a weak U.S. employment report for August.”

In other words, more bad economic news we all knew was coming came through the door, putting downward pressure on bond yields, which go hand in hand with mortgage rates.

This was no surprise, given the ongoing negative sentiment that simply won’t go away. The good news is that all the stock market swings are making someone rich, but probably not you or I.

It almost seems orchestrated now, the upswing, the downswing, and repeat. Meanwhile, mortgage rates go up, go down, hover in place, and repeat.

Of course, rates have been trending lower and lower because economic news got progressively worse after a brief bright spot.

But I still believe there probably isn’t much more rates can do in the improvement category. Why?

Well, the 10-year bond yield, which essentially dictates their direction, has a historic floor of around 2%, which happens to be its current level, more or less.

It hit a low of 1.93% earlier this week, but has since risen back above 2%. It’s rock-bottom, at least historically, so chances are it doesn’t get any better.

And, as I mentioned in the previous article, most banks and corporations are much better positioned now than they were when the mortgage crisis first struck.

While things are certainly bad, there’s not really too much new drama. There are a lot of lingering problems that will take a long time to sort out, but probably nothing that would surprise any of us at this point.

That said, mortgage rates on the popular 30-year may flirt with the 3% range, but likely won’t do much more than that.

Does Anybody Really Care?

Regardless, nobody seems to be interested in the low mortgage rates anyway.

Purchase-money mortgage applications continue to falter, at a time when affordability for first-time home buyers is at unprecedented levels.

That’s due to a lack of confidence, a lack of employment, and so on. And perhaps a view that buying a home now is like catching a falling knife.

Move-up buyers are screwed because they’ve got no home equity to use as a down payment, let alone to offload their current home, and those looking to do a simple rate and term refinance are stifled by the same problem, assuming the government doesn’t step in soon.

Finally, mortgage lenders could actually be holding rates a bit higher than they need to be (Chase) to keep demand in line with their reduced staff and risk appetite.

So even if they could go lower, they may not. Either way, I don’t think it’s mortgage rates that are holding us back, it’s real estate in general.  It’s just not that attractive anymore.

If you’re wondering whether to lock in your mortgage rate or float it, note that the Fed is considering buying more long-term Treasuries to lower mortgage rates.  But this is only expected to lower rates by 0.1 or 0.2 percent.

Again, I see 3.99% pretty much being the bottom for the 30-year fixed.  What do you think?  Comment below.

Read more: Mortgage rates vs. home prices.

(photo: rightee)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Most Consumers Only Obtain One Mortgage Quote


Here’s a shocker. Only about 40 percent of borrowers obtain more than one mortgage quote, according to a survey conducted by Harris Interactive and mortgage comparison service LendingTree.

Despite this, more than nine in 10 borrowers understand that mortgage rates vary among mortgage lenders, which explains why only three in 10 felt “very confident” they received the best deal on their mortgage.

Borrowers Know Mortgage Rates Aren’t All the Same

  • The survey found that the majority of borrowers
  • Only took the time to get a single mortgage rate quote
  • Even though they know lender rates vary
  • Which explains why they didn’t feel confident they were getting the best deal

So we know most homeowners don’t bother obtaining more than one quote, and that they don’t feel great about it.

But why aren’t they shopping if they have a bad feeling about it all? There’s got to be a good reason, right? Well, of course there is.

Why Aren’t Homeowners Shopping Around?

  • They aren’t quite sure the lender they spoke to is “the one”
  • Yet they aren’t taking the time to see what else is out there
  • One reason is time, or lack thereof
  • Another big reason is the complicated nature of mortgages in general

Borrowers aren’t putting in the time to shop for a mortgage because of the time-sensitiveness associated, and also because of all the complicated terminology.

In other words, they’re often pressed for time either because they have a certain close of escrow date, or they need to refinance ASAP for one reason or another.

And if I had to guess, some of that urgency might come from the one mortgage lender they manage to speak to, who convinces them to “act fast” to avoid missing out on whatever it is they’re selling.

Most Put In the Equivalent of One Working Day

  • For such a major financial decision
  • Consumers sure aren’t putting in much time
  • With most dedicating the equivalent of just one work day
  • Shopping for their home loan

But for such a big decision, it’s rather startling that nearly three-quarters of borrowers only spend the equivalent of one working day or less shopping for their home loan.

LendingTree noted that one in 10 borrowers only spent the amount of time it takes to brush their teeth to research their mortgage options. That’s frightening, but at least they’re brushing their teeth.

Roughly a quarter of those surveyed said they recognized that they could save more than $100 on their monthly mortgage payment by reducing their mortgage rate by one percent, yet they don’t seem willing to put in the work.

Interestingly, women were twice as likely as men to say they were not involved with shopping their purchase mortgage or refinance loan.

Nearly All Americans Comparison Shop for Everything Else

  • 96% of Americans comparison shop
  • When it comes to a new TV, car, or even a pair of shoes
  • Yet the numbers drop off considerably when it comes to a mortgage
  • Consider that the savings associated with a cheaper home loan will stay with you a lot longer and probably be a lot more sizeable

The study noted that 96 percent of all Americans compare prices when shopping for just about anything – make sure that includes the mortgage for goodness sake!

Sure, it’s painful, time consuming, and no one wants to be badgered by pushy salespeople, especially if they aren’t comfortable with all the terminology, let alone numbers.

But even a little bit of work can pay off big. There are other studies that prove you can save thousands of dollars simply by gathering an additional mortgage quote or two. Might as well just dive in and do it right the first time.

After all, if you’re saving money month after month for year after year, you’ll probably feel pretty good for a long, long time too. You probably won’t get the same feeling clipping a coupon or getting a one-time discount.

In short, be sure to contact loan officers at neighborhood banks along with a couple of mortgage brokers so you’re aware of all your loan options.  Also consider local credit unions and online mortgage lenders, both of which may offer lower rates than the competition.

Read more: What mortgage rate can I expect?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Are the Low Mortgage Rates a Home Buyer Trap?

Despite a slight uptick this week, mortgage rates are still pretty much rock bottom, and unarguably at ridiculously low levels.

This has sparked yet another refinance boom, with mortgage application volume rising to its highest point since May 2009, per the latest data dump from the Mortgage Bankers Association.

This is great news for existing homeowners with plenty of home equity looking to refinance to a lower rate. It’s also working out nicely for those who don’t have equity thanks to programs like HARP 2.0.

All in all, it’s a gift to these borrowers who are experiencing some serious monthly mortgage payment relief.

But what about new and prospective home buyers?

Are People Buying Because of the Low Rates?

With rates this low, you have to wonder if it’s all a big trap (whether intentional or not) to lure would-be buyers off the sidelines and into the game.

If you’ve followed the housing market lately, at least in certain regions of the country, such as Los Angeles, homes are speeding into pending status just days after being listed.

In fact, many are pending just one or two days after being listed. It’s looking like a serious seller’s market, though obviously a very unconventional one.

The low rates have increased affordability so much that a new pool of buyers has essentially been created, which has facilitated both standard and short sales.

Again, great news for those who have waited very patiently to sell their homes; many can finally do so!

And perhaps even better for the housing/mortgage market, with seemingly bad loans being replaced with better ones.

Heck, I’m even seeing a ton of flips that are actually selling for a tidy profit. I thought flips were dead?

Reminder of the Homebuyer Tax Credit

But it all seems reminiscent of the boost seen with the now infamous homebuyer tax credit.

That “free money” created a short-lived, yet steep run-up in home prices as first-time home buyers came out in droves.

Just a short time later, it became clear that those who purchased a home did so at a premium, and their tax credit was quickly eclipsed by a larger loss in home value.

If you take a look at this home price chart, you’ll see how the homebuyer tax credit stoked demand, but its effect was clearly fleeting.

In fact, those who purchased before the tax credit expiration were actually worse off compared to those who bought later on.

To bring it all together, home prices were pumped up as a result, similar to what we may be seeing with the record low mortgage rates.

With rates so low, homeowners and their clever real estate agents probably feel they can list their homes for more than they could have six months ago.

And the whole “it’s never been a better time to buy” adage is back.

Economy Still in Disarray

The big problem is that the economy is still a huge mess, with the European crisis hanging over our heads, and domestic unemployment still far from unresolved.

Then there are the millions of homes in the process of foreclosure, or knocking at its door.

So is this artificial stimulus actually going to help the real estate market long-term, or is it just another quick fix with no staying power?

My gut tells me that this recent run-up in prices and virtual 180 in consumer sentiment is bad news.

Getting into a bidding war over a house just months after no one was interested seems really fishy.

Additionally, all these calls of a “housing bottom” are concerning as well. You always have to wonder when every single media outlet (including your local news channel) is claiming that the worst is behind us.

Of course, the low rates have led to lower mortgage payments, even with the recent home price increases factored in.

So there’s some serious power behind those rates. The question is will you be able to buy a home next year at an even better price with a similar (or even lower) interest rate?

Read more: Home prices vs. mortgage rates.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Proposed Bill Lowers FHA Costs for Educated First-Time Buyers

Last updated on March 20th, 2014

A new bill being floated by Representative Karen Bass (D-Calif.) aims to lower the costs of obtaining an FHA loan, which have surged in recent months.

Back in April, the FHA’s upfront mortgage insurance premium increased from 1% to 1.75%. On a $200,000 loan, we’re talking about an increase of $1,500, which certainly isn’t incidental.

The change was implemented to bolster the FHA’s capital reserves, which were drained as a result of the ongoing mortgage crisis.

But clearly this has made FHA loans a lot less attractive to first-time homebuyers, many of which rely on the agency’s signature low-down payment loan program, which requires just 3.5% down.

Enter the Homeownership Preservation Education (HOPE) Act

To offset some of these new costs, Bass has proposed new legislation, namely, the “Homeownership Preservation Education (HOPE) Act.”

In short, it provides a 0.25% reduction on the FHA upfront mortgage insurance premium for first-time homebuyers who complete a HUD-approved housing counseling course.

On that same $200,000 loan referenced earlier, a borrower would save $500 in closing costs, making homeownership more attainable and a little less painful.

The general thinking behind the bill is that more educated homeowners default less often, which reduces foreclosures and losses for the FHA.

As a result, these types of buyers should be able to catch a break on the costly upfront mortgage insurance premium.

While it may seem minimal, every little bit helps because purchasing a home can deplete your assets very quickly.

Look at Mortgage Alternatives

While this bill is certainly well intentioned, first-time homebuyers should also consider other loan options, such as conventional loans.

Though you generally have to come up with 5% down, you won’t have to deal with the pesky FHA upfront mortgage insurance premium, which is now ridiculously high.

Or look at programs such as Fannie Mae Homepath, which only require a 3% down payment and NO mortgage insurance.

If possible, you may also want to consider getting a gift for a larger down payment, that way you can avoid mortgage insurance altogether.

And with a loan-to-value ratio south of 80%, you’ll also enjoy a lower mortgage rate, which will decrease your mortgage payment and increase your affordability.

So along with the HUD-approved homeowner education course, educate yourself on all your loan options well before applying for a loan.

Also be sure to take the time to review your credit report to ensure there are not any errors holding you back from securing a lower rate.

Putting in the time to do some housecleaning before applying for a mortgage is probably the best way to save money.

By the way, beginning next week, the FHA is cutting mortgage insurance premiums for streamline refinances., which should be a godsend to scores of underwater homeowners.

Read more: Which mortgage is right for me?

(photo: cdsessums)

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Will Low Mortgage Rates Hurt Home Sales?

Last week, I argued that the super low mortgage rates could actually be contributing to strategic defaults.

The general idea being that the current low mortgage rates today make it even less desirable to hold a “high-rate” mortgage from the past.

The only positive from this assumption is that homeowners in this position may buy a new home and bail on the old one.

That’s a positive for them, minus the credit score hit, but a negative for the housing market and mortgage lenders (another foreclosure, more overpriced inventory that is difficult to unload).

And now it has occurred to me that the promise of low mortgage rates for the foreseeable future may have the unintended consequence of hurting home sales, at least in the near term.

Only 33% of Americans See Mortgage Rates Rising

You see, a new poll from mortgage financier Fannie Mae revealed that just 33 percent of consumers expect mortgage rates to rise in the next 12 months.

That figure is down from 45 percent a month ago, and is the lowest number Fannie has recorded since their monthly tracking began.

At first glance, it sounds like great news. Mortgage rates are going to stay at or near their record lows for longer than we thought.

Low mortgage payments for everyone who decides to dive in! Can’t argue with that.

But wait, why isn’t anyone buying a home? Well, if mortgage rates aren’t going anywhere fast, why not simply take a “wait-and-see” approach.

Kick back, see how the economic uncertainty plays out, watch for more home price declines, and buy next year instead.

You see, Americans also expect home prices to decline further. On average, they see a 1.1 percent decline over the next 12 months, which is the highest expected decline to date in the survey.

And only 18 percent believe home prices will increase over the next year, the lowest number reported to date.

So it’s a bit of a dilemma. If home prices are expected to keep slipping, and mortgage rates are forecast to hold steady, why buy now if you don’t have to?

[Home prices vs. mortgage rates]

Might as well just rent a little bit longer (or hang out in your parent’s basement) before making a move, especially since a lot of homeowners are pricing their homes higher as a result of the insanely low mortgage rates.

Of course, it’s still a relatively attractive time to buy as a first-time home buyer. And trying to time the bottom of the market is a pretty trick endeavor, if not impossible.

But with the traditionally slower portion of the home buying season ahead of us, holding out may lead to a discount over today’s prices.

Read more: Should you buy a house now or wait?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


You May Have Missed the Housing Bottom, But Not the Mortgage Rate Bottom

Posted on May 15th, 2012

Over the past several months, it has become somewhat clear (insert gigantic grain of salt here) that home prices may have bottomed last year, at least in some areas of the country.

While it’s still too early to say so definitively, it looks like some homes were snatched up at rock-bottom prices a year ago.

These same homes are now valued quite a bit higher, and recent comparable sales are backing up the numbers.

Of course, some are also calling it a “mini bubble,” otherwise known as a fake recovery, spurred on in part by the record low mortgage rates.

But only time will tell…

[Tips for first-time home buyers.]

You Missed the Bottom

Perhaps you’re kicking yourself, thinking you could have purchased that same house for a lot less a year ago.

Yep, you were all set to time the bottom, and seemingly out of thin air, it came and went, and you were none the wiser.

How did that happen? You were watching home prices on a weekly basis, looking at recent sales, surveying market conditions. How could you have missed it?

Well, they always say that timing the market bottom is near impossible, partially because you only know it has actually hit bottom when it’s too late.

So did you mess up? Did you miss your chance to get the steal of the century? Not quite.

[Are mortgage rates negotiable?]

Have Mortgage Rates Bottomed?

For much of the first half of 2011, mortgage rates on the popular 30-year fixed stood around 4.75%.

While this may have seemed like the “bottom for mortgage rates,” they now sit around a percentage point lower, which most people would have never guessed in a million years.

That’s right; today you can snag a 30-year fixed for around 3.75%, which is pretty much unheard of.

And who knows, rates could fall even lower over time, though the more they drop, the less upside there is for lower rates.

You certainly shouldn’t bank on rates slipping any lower because then you’re falling into the same “timing the bottom” trap.

All that said, let’s do the math to see what the difference is using a real world scenario, assuming the home buyer is putting 20% down.

2011 Home price: $475,000
2011 Mortgage rate: 4.75%
2011 Mortgage payment: $1982.26
Total interest paid: $333,613.60

2012 Home price: $520,000
2012 Mortgage rate: 3.75%
2012 Mortgage payment: $1926.56
Total interest paid: $277,561.60

Wait just a minute here. Those who missed the housing bottom are actually ending up with a lower mortgage payment?

While not significantly lower, it’s still roughly $50 cheaper each month to buy the same house today, and results in $56,000 in interest savings throughout the life of the loan (yes, the down payment is slightly higher).

Who would have thought that? Turns out you didn’t necessarily miss out, assuming you are financing the deal via a mortgage, which most of us are.

Put simply, even though you may have missed the housing market bottom, whether by choice or accident, waiting may have actually paid off.

Read more: Home prices vs. mortgage rates.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Is a 2% 30-Year Fixed Mortgage a Real Possibility?

Week after week, mortgage rates continue to shatter records, and dip to levels no one thought was possible.

It seems as if every month we have to revisit the conversation because what seemed like a bottom wasn’t.

In fact, not too long ago a 30-year fixed mortgage in the 3% range seemed absurd. Now it’s the norm, and everyone seems to want better.

This week, the hugely popular 30-year fixed averaged 3.53%, down from 3.56% last week, per Freddie Mac data. That’s a new all-time low.

And the 30-year fixed has been below 4% in every week but one so far in 2012. So to say it’s been a good year for mortgage rates would be a massive understatement.

By the way, the 15-year fixed also discovered new record territory at 2.83%, down from 2.86% last week.

[30-year fixed vs. 15-year fixed]

So this all begs the question, “Can the 30-year fixed fall below 3%?”

Is It Possible?

If you talk to most bankers, mortgage brokers, or anyone else who tracks the mortgage market, they’ll probably tell you to lock your mortgage rate and forget about it.

At the very least you’ll sleep soundly at night, right? After all, mortgage rates are already at record lows, so why get greedy?

But these same people would have made the same recommendation a year ago when mortgage rates were a percentage point higher.

Heck, I was one of the many that figured rates were bottoming, or very close to a bottom.

I’ve argued many times that the 30-year fixed probably wouldn’t go much lower than 3.5%, but I’ll probably be eating my hat now (if I owned one).

I’ll admit I was wrong, but now I’m focused on how low rates can actually go.

In case you didn’t know, mortgage rates follow the 10-year Treasury bond yield, which is currently around 1.50%.

And because the 30-year fixed is pricing around 3.50%, the spread is about 200 basis points.

[What mortgage rate can I expect?]

If the Yield Keeps Falling…

If the yield were to fall to around 1%, then the 30-year fixed could dip below 3%, and homeowners would finally be able to get their hands on a 2% 30-year fixed mortgage.

I don’t mean 2% literally, but something in the 2% range. So something around 2.75% or 2.875%, which would be nothing short of spectacular.

And if you think it’s impossible, note that a number of Wall Street bears see that yield falling to around 1% by the end of the year, thanks to the looming so-called “fiscal cliff.”

The fiscal cliff refers to the end of some major Bush-era tax breaks and spending cuts, which some argue could lead us in to recession again.

But it’s still very questionable – most believe things will be sorted out at the eleventh hour, with benefits possibly extended, as to not make a very fragile situation any more vulnerable.

However, with all that uncertainty, demand for “safe” bonds could push that yield lower and lower, meaning you may have to refinance again in the near future if you want a lower mortgage rate than your friends.

It’s not to say that you should cancel your refinance application today and wait for better, because as mentioned, we are in unprecedented times and you’ll certainly have a great rate either way.

But don’t be surprised if mortgage rates continue to trickle even lower, as insane as that may sound.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Happy Holidays: Your Gift is Record Low Mortgage Rates

Last updated on March 9th, 2018

You guessed it. Just in time for the holidays, mortgage rates fell to yet a new record low. What a nice gift to give existing and prospective homeowners.

Average interest rates on the popular 30-year fixed-rate mortgage slipped to 3.91% during the week ending December 22, down from 3.94% a week earlier, per Freddie Mac data released today.

The loan program had hit a record low a week earlier as well, though it hasn’t displayed much movement for about six months. It has basically hovered around its current level for months now.

In fact, you’d have to go all the way back to July to see any significant movement. Back then it averaged a still absurdly low 4.55%.

However, rates are now nearly a point below the 4.81% average seen a year ago, meaning all those who refinanced recently may have to take another look at their mortgage.

Obviously, this is good news for the mortgage industry, as loan origination volume should receive yet another boost. But it’s a pain for borrowers who have to continually go through the process of refinancing. Or determine when that “right time” is.

Of course, the reward for all that hard work is lower and lower mortgage payments, and greater affordability for those who choose to own homes.

Meanwhile, interest rates on the 15-year fixed held firm at their current record low of 3.21% and are about a point below year-ago levels when they averaged 4.15%.

[30-year fixed vs. 15-year fixed]

Interest rates on adjustable-rate mortgages didn’t display much movement week to week. The 5/1 ARM dipped to 2.85% from 2.86%, and the one-year ARM slipped to 2.77% from 2.81%.

Both are significantly lower than they were a year ago, at 3.75% and 3.40%, respectively.

Mortgage Rates Tend to Be Low When the Economy Is in Bad Shape

So we know mortgage rates keep dipping lower, and while it’s good news for those who own homes, and those who aspire to own homes, it’s not good news for the economy as a whole.

When interest rates are low, it’s a signal that not all is well in the economy. Of course, you don’t need to know where interest rates are at to recognize that these days.

It’s pretty clear that the economy is in the dumps, and it’d be hard to imagine things turning around very quickly.

In other words, even though mortgage financing is historically cheaper than it has ever been, it’s not necessarily the greatest time to buy a home.

The forecasts are still grim, and home prices may continue to fall for the foreseeable future.

[How do interest rates affect home prices?]

There’s plenty of uncertainty in the air, and so it’s difficult to determine if buying now is a bargain or if you’ll simply be catching a falling knife.

Again, if you buy and hold for the long run, it doesn’t seem like a terrible time to buy real estate.

After all, there are many millions of existing homeowners who are in worse (home equity) positions than you will be, so you’ll have a pretty good head start. And a super low interest rate to boot!

The big question is how long it’ll take for things to turn around? Something to ponder…

Happy Holidays!

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.


Why Your Mortgage May Get More Expensive

Last Friday, the Federal Housing Finance Agency (FHFA) announced plans to increase guarantee fees (g-fees) on loans sold to Fannie Mae and Freddie Mac.

Banks and lenders pay Fannie and Freddie so-called “g-fees” in exchange for purchasing their loans and bundling them into mortgage-backed securities, which are then sold to investors on the secondary market.

The pair also assume the risk if the loans in the underlying securities default, which has certainly been an issue since the mortgage crisis reared its ugly head.

Since then, g-fees have inched higher and higher to account for risks not seen in years past when home price appreciation masked the impending danger.

Currently, it is estimated that Fannie and Freddie own or guarantee about 60 percent of residential mortgages, meaning there’s a good chance they own yours.

And their share has certainly increased even more as a result of the credit crunch, which pushed many private players out of the secondary market.

G-Fees Going Up 10 Basis Points

The FHFA has now directed Fannie and Freddie to raise g-fees on single-family mortgages by an average of 10 basis points (0.10%).

This comes on the heels of an increase back in April, which was implemented to fund the payroll tax cut extension.

The increases will be effective with commitments starting November 1, 2012 for loans sold for cash, and December 1, 2012 for loans exchanged for mortgage-backed securities (MBS).

The average g-fee charged by Fannie Mae and Freddie Mac increased to 28 basis points in 2011 from 26 basis points in 2010, according to a new annual report required by the Housing and Economic Recovery Act of 2008.

Why the Latest Increase?

FHFA Acting Director Edward J. DeMarco said the move is intended to lure more private capital into the mortgage market, which is largely government-supported at the moment.

He believes the increase will move the pair’s pricing closer to a level one would expect if mortgage credit risk were privately capitalized.

The hope is to get the government out of housing, or at least minimize its enormous role.

The big question is whether the higher fees will actually be felt by consumers. At the moment, mortgage rates are pretty much at their lowest levels ever.

And because the Fed keeps buying mortgage securities, rates have inched lower and lower.

So any increase related to the g-fees may actually be absorbed by the Fed. If rates do increase, one would expect something minimal, such as a rate of 3.625% instead of 3.5% on a 30-year fixed mortgage.

It’s not to say it’s an incidental increase, as that can equate to thousands over the life of the loan term, but all things considered, mortgage rates are already highly subsidized by the government.

Speaking of, the new fees are also intended to reduce cross-subsidies between higher-risk and lower-risk mortgages by increasing the fee more on loans with terms longer than 15 years.

Put simply, 15-year fixed mortgages are less likely to default, and thus should come with lower guarantee fees.

The move is also intended to make g-fees more uniform for both lenders who deliver large loan volumes and those that originate smaller volumes.

At the moment, the bulk of loans sold to Fannie and Freddie come from a small number of large lenders.

Mortgage Rates Based on State?

The FHFA also left a cliffhanger at the end of their press release, noting that it was developing risk-based pricing at the state level.

In other words, mortgages may be priced differently based on where they are originated.

So a New York mortgage may cost more than a California loan, or vice versa, depending on the costs.

For example, in states where foreclosure processes are more expensive, such as in judicial states, the g-fees may be higher.

But again, consumers may not even notice the difference in price because there are so many other factors that affect mortgage rates. Still, it’s a rather interesting development.

It looks as if the future of mortgage lending may mirror insurance pricing, which is very heavily data-driven, meaning more and more factors may eventually determine the interest rate you ultimately receive.

Update: Five states have been singled out by the FHFA, including Connecticut, Florida, Illinois, New Jersey, and New York, thanks to their higher-than-average default-related costs.

So mortgages originated in these states could be imposed a 15 to 30 basis point upfront fee, charged to lenders, and likely passed on to the consumer.


Consumers Don’t Care About Low Mortgage Rates Anymore

Last updated on January 25th, 2018

As you’re probably aware, the latest move to boost the economy was another round of quantitative easing, known as QE3.

This most recent initiative targets mortgage-backed securities specifically, with the Fed pledging to purchase $40 billion per month, on an open-ended basis, until things improve.

Since it was announced, mortgage rates have inched down to new all-time lows, not that they were anywhere close to high to begin with.

In other words, I don’t think anyone was pumping the brakes on buying or refinancing because rates were “too high.”

So now homeowners that may have qualified for a rate of 3.5% on a 30-year fixed can snag a rate of 3.25% instead. Pop the champagne!

On a $200,000 loan amount, we’re talking about nearly $30 a month in savings. And ideally this money is pumped back into the economy to get things chugging along again.

But are low rates the problem here, or simply the easiest out for the Fed?

Mortgage Rates No Longer a Popular Search Term

I decided to do a little test to see if the low mortgage rates were making a difference.

Sure, they made a difference over the past few years after dropping several percentage points, but now that they’ve been so low for so long, I wanted to see if pushing them even lower would make a material difference.

So I turned to Google, and more specifically, their Insights for Search tool. It shows you what people are searching for on Google, which can be a pretty powerful gauge of something’s popularity.

For example, if we look at the term, “NFL,” we can see that it’s very seasonal, and also very predictable.

In August, searches for “NFL” jump, and then remain elevated until January when the Superbowl takes place.

Search volume quickly plummets after the season ends, then rises briefly in April during the NFL draft, and remains low throughout summer.

What about the term “mortgage rates?” Well, if we look at the chart, search volume is now about the same as it was back in 2006, when the housing market was reaching its apex.

But it has fallen by nearly 50% compared to numbers seen in August 2011. And volume is only about a quarter of that seen in December 2008.

Since then, it has steadily fallen, aside from a couple blips in August 2010 and August 2011.

In both of the past two summers, mortgage rates fell rather significantly, which explains the boost in search volume.

Mortgage rates for 30-year fixed mortgages also fell from 6.09% in November 2008 to 5.29% in December 2008, per Freddie Mac data, which explains the spike in search volume then.

And even though mortgage rates are now about two percentage points lower than that, search volume is nowhere close to what it once was.

Why Did We Switch Off?

So what gives? Did most people refinance already, or do many people perceive the low rates as “old news?” Or is it that most people are aware of them, but realize they don’t qualify for one reason or another?

Whatever it is, it’s pretty clear that there is a lot less interest than there used to be, despite the housing market showing signs of improvement. If anything, volume should be up with home sales. But that’s not the case.

Could it be fatigue, or is it that it’s just boring at this point? How many straight weeks or record low mortgage rates do we need to hear about it on the local news?

Most people I speak to (outside the mortgage world) don’t seem too interested about the rates. They know they’re low, but don’t really care too much.

Even if they didn’t refinance, they’re usually pretty lax about the whole deal, which makes me wonder if pushing rates lower and lower is the solution here.

Perhaps the Fed should focus on getting the economy kickstarted another way, instead of pushing interest rates to zero.

Read more: Are mortgage rates negotiable?

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.