Seattle Mortgage Rates & News For The Beginning of April – Rates Rising!

I mentioned throughout February and March that the end on March 31st of the Federal Reserve’s program to purchase mortgage backed securities would impact mortgage rates in a negative way.  What was interesting to witness was the rise in rates starting several days before the end of the program.  

Positive economic reports and other financial data during the last week of March pushed mortgage rates from their lowest levels in 2010 to their highest all in one day.  The information and sentiment from the Weekly Mortgage Application Index, Durable Goods Order data and a poor auction of 5 Year Treasury Notes took rates from 4.75% to 5.125% in a matter of hours!  Things got a bit better the last day of the month with employment data that was less than stellar but those improvements were erased the next day as soon as the Fed program ended.  

Mortgage rates then spent the first full week of the month attempting to improve with some mildly positive activity although no dramatic decreases to make up for what was lost the week before.  If you were in process to close on a loan and hadn’t locked your rate, it’s likely that you were either faced with a different rate or different costs than what you may have had on your initial application.  So where will go from here as we move away from the Fed program and towards the expected end of the Home Buyer Tax Credit?

The expectation amongst the mortgage industry is that rates will slowly continue to increase over the next several months.  That of course is dependent upon the overall economy contuining to slowly improve.  As more investors leave the safety of bonds and foray back into the stock market, higher yields and rates will be required in the mortgage industry.  The level of refinancing has fallen and after the Home Buyer Credit ends the number of purchases may also decrease.  That drop in mortgage applications may also contribute to an increase in rates as private investors look for higher returns.   Although most consumers aren’t really feeling the economy “improving” yet, it seems to have stabilized which alone shows some strength.   Economic data and movement in either direction will have a larger impact on rates in 2010 as there will not be government support keeping rates low as there was in 2009.

As rates continue to rise it’s important as a borrower to understand the impact it can have on monthly payments and purchase prices.  See my previous post about the Effect of Higher Mortgage Rates on Purchase Price to learn more.   While a rate of 4.875% for a 30 Year Fixed Conventional is still available, it will require a 720+ credit score, 20% equity and a borrower willing to pay some origination fees.   I encourage all borrowers to not only shop around but also to be prepared to make a move and lock-in if you’re satisfied with the rates you’re finding.  It’s likely that they won’t be going down much in 2010 and their rise is more a question of “when” than “if”.

Michael Pollock is an Accredited Buyers Representative, member of the Seattle King County Association of Realtors and Licensed Loan Originator in Washington.  He also works with clients in the Tacoma/Pierce County area – visit EXP there at www.tacomapowersearch.com