Mortgage Rates Make New 2011 Lows

Mortgage rates in Minnesota plunged to new 2011 lows this week. 

According to Freddie Mac's weekly Primary Mortgage Market Survey, the national, average 30-year fixed rate mortgage fell to 4.39% this week -- the lowest 30-year fixed reading since November 18, 2010.

The 0.16 drop from last week is the largest one-week rate drop in more than 2 years, and, although the 30-year fixed remains above its all-time lows from November 2010, two other benchmark products made new records this week.

Both the 15-year fixed rate mortgage and the 5-year ARM are reporting lower than at any time in recorded history.

Freddie Mac puts those average rates at 3.54% and 3.18%, respectively.

Mortgage rates are dropping for several reasons, including :

• U.S. economic growth is slower-than-expected
• The U.S. government plans to curb its spending
• Global investors seek the safety of U.S.-backed bonds

The first two items are unfavorable for business and, as a result, stock markets have sold off all week. The Dow Jones Industrial Average posted an 8-day losing streak and Thursday it made its biggest one-day loss since 2008.

When equities lose, bonds tend to gain. This leads mortgage rates lower.

Mortgage rates also fell on "safe haven" buying; bond buys made because of their relative safety to risky assets. Mortgage bonds are considered "safe" so when economies and geopolitics are uncertain, mortgage rates improve.

Going forward, there are reasons for mortgage rates to fall again. The economy won't rebound overnight and neither will investor confidence. However, markets can be fickle and rates have been known to reverse quickly.

With rates as low as they've been history, it's an advantageous time to refinance your home loan, or purchase a new property.

Closing At The Start Of September? Watch Out For Labor Day.

Home sales have heated up, according to the National Association of REALTORS®.

More homes are going under contract this summer than went during the winter or spring seasons. Many of these homes are scheduled for late-August/early-September closings. 

If your home is among them, plan ahead. 

Like for the rest of the U.S. workforce, Labor Day is a popular vacation time in the real estate, title and mortgage industries. Closings come together more slowly when the parties involved are on holiday. In addition, when issues arise, they are often slower to resolve because not everyone is "present". 

Therefore, if you're under contract to buy or sell your home, or have a refinance in-process with a lender, get proactive with your home and your loan. Finalize your approval as quickly as possible.

Here are some tips to help your loan clear faster:

1. Prepay your first year of homeowners insurance, effective your closing date. Provide proof of payment to your lender.
2. Document and deposit all gifts and retirement withdrawals to be used at your closing as early in the process as possible.
3. Get Power of Attorney forms signed by all parties, and lender-approved, if applicable.
4. When your lender makes a paperwork request, fulfill the request within 24 hours.

There are steps you can take to make your closing go more smoothly, too.

First, if your transaction is purchase, don't leave your walk-through for the last-minute. Schedule it for as early as reasonable. This way, if there's an issue, there's ample time to resolve it. Remember, it's harder to solve problems when one or more parties to the transaction is away on vacation.

Second, if you have planned time off between now and your closing, make it known, and be reachable in the event of emergency by phone, email or both.

Lastly, if possible, avoid scheduling your closing for the Friday before Labor Day or the Tuesday after. Real estate, title and lender offices are notoriously short-staffed and overworked on these two days. Routine tasks take longer than usual.

You can't stop people from going on vacation, but you can plan for it. It would be foolish not to.

A Mortgage Rate Strategy For July's Jobs Report

At 8:30 AM ET Friday, the Bureau of Labor Statistics will release the July 2011 Non-Farm Payrolls report. Mark it in your calendar. If you've been watching mortgage rates fall to new all-time lows this week and fear a mortgage rate reversal, Friday could be the day.

The monthly Non-Farm Payrolls data can swing a big stick in mortgage markets.

More commonly called "the jobs report", Non-Farm Payrolls details the U.S. workforce, providing sector-by-sector analysis of workforce, as well as the national Unemployment Rate. 

The jobs report affects mortgage rates because of how important jobs are to the U.S. economy.

When there are more working Americans:

1. There's more consumer spending, a boost to businesses
2. There's more tax collection, a boost to governments
3. There's more personal savings, a boost to households

In July, analysts anticipate 85,000 new jobs created. This would be a 4-fold increase from June's 18,000 figure.

The Unemployment Rate is expected to remain unchanged at 9.2%.

For rate shoppers and home buyers in Minnesota , these Wall Street expectations can be as important as the actual data itself. Right now, traders placing bets, expecting 85,000 new jobs in July. If the final tally is more than 85,000, traders will load up on equities at the expense of bonds. This is because job growth is good for the economy.

When bonds sell off, rates rise.

Conversely, if jobs growth is less than 85,000, mortgage rates should drop.

Mortgage rates are near all-time lows this morning. By Friday, they could rise. The safe move is to lock your rate today. Rates may fall when the jobs report is released, but there's much more room for rates to rise.

What Will The Debt Ceiling Agreement Do To Mortgage Rates?

The United States is projected to reach its legal $14.294 trillion debt limit today. The limit was set by Congress February 12, 2010. The U.S. Treasury may not issue new debt beyond the debt ceiling.

Since April 2011, Congress has debated ways to remain below the nation's $14.292 trillion borrowing limit. The debate commenced with the passage of the 2011 U.S. Federal Budget which featured a $1.645 trillion deficit.

This multi-trillion dollar deficit ensured that the debt ceiling would be touched at some point during the current fiscal year.

That date was May 16. It took an intervention from the Treasury Secretary to temporarily extend the limits; an "extraordinary measure" meant to keep the U.S. government from defaulting on its debt.

With additional room to borrow, then, the U.S. Treasury's new debt ceiling date was moved to August 2. Congress has been debating the federal budget since mid-May with the dual-goal of (1) Remaining below the federal debt limit, and (2) Creating a budgetary surplus for the future.

An agreement is expected today.

For home buyers and rate shoppers in Minneapolis , this is an important development. The debt ceiling agreement will influence mortgage markets and, as a result, require amendments to home affordability calculations. As mortgage rates change, your purchasing power does, too.

Unfortunately, we don't know in which direction mortgage rates will go.

Since the prospect of a deal was first hinted Friday, mortgage rates have been improving. Conforming, 30-year fixed rates are down nearly 0.250 percent, lowering a $150,000 mortgage payment by $22 per month.

The final deal terms of a deal, however, could lead rates higher.

As always, the safest play is to lock your mortgage rate if you are comfortable with its proposed payment. Yes, mortgage rates may move lower in the future but, then again, maybe they'll move higher.

What's Ahead For Mortgage Rates This Week : August 1, 2011

Mortgage markets improved last week as the U.S. debt ceiling debate continued on Capitol Hill. Bonds traded in a range Monday through Thursday before breaking higher Friday morning.

30-year fixed conforming mortgage rates improved in Minnesota last week, falling to levels just north the product's all-time low set in November 2010.

5-year ARMs improved last week, too. The benchmark adjustable-rate mortgage's average national rate is now tied with its all-time low, also set last November.

This week, the direction of mortgage rates depends on two events:

1. The resolution of the U.S. debt ceiling debate, due Tuesday
2. The July Non-Farm Payrolls report, due Friday

Mortgage rates will be volatile as markets grapple with the expectations for the above events, and their eventual outcomes. 

Sunday evening, for example, congressional leaders reached an agreement to raise the U.S. debt ceiling by $2.1 trillion, and to introduce $2.5 trillion in budget cuts within 10 years. The deal must pass Congress, however, and until it does, speculation will push mortgage rates around.

Friday's jobs report should swing mortgage rates, too. 

After starting the year strong, the 2011 jobs market has faded. Net new jobs have dropped 5 months in the row and the national Unemployment Rate is climbing. Weak job growth portends weak consumer spending and a weak economy -- typically two outcomes that are good for mortgage rates. 

Because of doubt cast by the debt ceiling debate, though, it's too soon to know how Wall Street will react to the jobs data -- strong or weak.

For now, mortgage rates remain low. They may fall further, or they may not. The "safe bet" is to lock.