New Year Begins with Mortgage Rates Remaining Low

There is no doubt that the residential housing market gained momentum in 2012. As the New Year begins with mortgage rates remaining low, it is expected that this movement towards recovery will continue to bring improvements that will filter down into other areas of the economy. This past week, data reflected that, even though housing has entered its slow season, this sector is still experiencing gains in both sales and values.

According to the S&P/Case-Shiller Home Price Indices (HPI), home prices increased for the twelve months ending in October. The 10 City Composite Index rose 3.4% on an annual basis and the 20 City Composite rose 4.3%. As of October 2012, average home prices nationwide were back to autumn 2003 levels.

The October 2012 levels for both Indices are approximately 8.4 to 9% above their early 2012 lows. Sales of newly constructed single family residences rose 4.4% in November, an increase of 15.3% from November 2011, as well as, the highest level since April 2010, according to the Department of Housing and Urban Development and the U.S. Census Bureau. For the third consecutive month, pending home sales increased 1.7% in November, according to the National Association of Realtors. This increase was 9.8% over November of 2011 and further evidence that the housing market is moving forward and recovery continues.

According to the latest release of Freddie Mac's Primary Mortgage Market Survey, average fixed mortgage rates have ended the year near record lows which is contributing to high home affordability. FreeRateUpdate.com's most recent survey of wholesale and direct lenders shows that conforming mortgage rates for this week remained the same.

Current conforming 30 year fixed mortgage rates are as low as 3.125%, 15 year fixed mortgage rates are as low as 2.375% and 5/1 adjustable mortgage rates are as low as 2.375%. These low fixed mortgage rates are below those on record for January of 2012. Guidelines still require that borrowers have good credit in order to receive low interest rates available for home purchase loans and mortgage refinances.

HARP continues into this year with the possibility of expanding to include more homeowners. The HARP program has already helped many borrowers refinance to low mortgage rates without the need of an appraisal, but at this time, HARP refinances are limited to those who have loans that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009.

For eligible borrowers, there are no loan to value caps with a HARP 2.0 loan so that even underwater borrowers with over 125% can refinance. Since some lenders do have overlays, HARP mortgages can be obtained by any lender which makes it easier for borrowers to find one to work with their circumstances. Any expansion of HARP loans would be a benefit to additional homeowners who would like to move to a better mortgage, as well as, further stabilizing the housing market.

FHA 15 year fixed mortgage rates dropped .375% and are now as low as 2.375%. Remaining the same, FHA 30 year fixed mortgage rates are as low as 3.250% and FHA 51 adjustable mortgage rates are as low as 2.500%. FHA's business has grown this past year as it continued to be a major player in the housing recovery. While lending continued to be tight, FHA has kept most of its guidelines in place including the low down payment requirements and flexible credit guidelines. Throughout last year and going into the New Year, FHA's loan limit is still at $729,750 which expands its reach to even high end borrowers. While there was some talk about FHA reducing the acceptable seller concessions, it continues to remain at 6% which helps borrowers pay the higher FHA closing costs (APR) due to various FHA fees and the upfront mortgage insurance premium.

The streamline refinance program took off in 2012 due to the reduction of the upfront and annual mortgage insurance fee for loans that were endorsed prior to June 1, 2009. This FHA streamline offer will continue to be in effect until the end of 2013. Through the FHA streamline, homeowners are able to refinance without the need of an appraisal or other documentation as long as there is no cash out. Hopefully, more homeowners will take advantage of the FHA streamline loan which can be obtained by any FHA approved lender.

Jumbo 5/1 adjustable mortgage rates increased .250% and are now as low as 2.375%. There were no changes to jumbo 30 year fixed mortgage rates which are as low as 3.250% and jumbo 15 year fixed mortgage rates which are as low as 2.70%. While borrowers need excellent credit in order to receive low jumbo mortgage rates, guidelines can differ from lender to lender. Jumbo mortgage rates have really become competitive as compared to January of 2012 when the jumbo 30 year fixed rate was at approximately 4.125%.

The fall in jumbo rates has brought on an increase in sales of higher priced homes for the last quarter of 2012 and hopefully will continue this year. With more lenders entering this market, high end borrowers should shop around for low jumbo mortgage rates and flexible jumbo mortgage guidelines.

Over the past week, investors were watching the fiscal cliff negotiations which hurt stocks. MBS prices (mortgage backed securities), which affect mortgage rates, did not see any major movement. Mortgage rates move in the opposite direction of MBS prices. According to the Labor Department, jobless claims for the week ending December 22nd dropped to 350,000 which was below expectations. The Conference Board reported that Consumer Confidence dropped more than expected in December to a four month low and is the result of concern over the fiscal crisis. The Chicago PMI increased to a seasonally adjusted 51.6 in December which was above expectations.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fee.

Written by Ed Ferrara for www.RealtyTimes.com Copyright © 2012 Realty Times All Rights Reserved.