Fixed and ARM rates are roughly even after last week’s Fed meeting and better than expected jobs report. Mortgage rates dropped about .125% after the FOMC cut the Fed-to-bank Discount rate by .25% to 2.25% and cut the bank-to-bank Fed Funds Rate by .25% to 2%. This was the first time after the last six Fed cuts that mortgage rates actually dropped. After the five Fed cuts previous to April 30, mortgage rates rose because markets were expecting more. This Fed move and their statement seemed to be exactly what markets were expecting: .25% cuts and an indication that we’re near the end of the cut cycle. As for jobs, markets were expecting that 75,000 jobs were lost but only 20,000 jobs were lost. Mortgage bonds sold off on this news and pushed rates back up.
One sign of life in credit markets is that super conforming pricing is coming down on loans from $417,001 to a $729,750 cap depending on county, and I am now adding that pricing to my list below. There’s now a .25% spread between 30-year fixed super conforming and 30-year fixed jumbo. If you recall, FNMA and FHLMC didn’t even start buying these loans from lenders until April 1, so even though markets have known about the higher conforming limits for several months, there was no actual market for it until one month ago. Now that there is, it seems to be loosening up. More on super conforming rates and guidelines in the coming weeks.
One note on semantics: I call the higher conforming loans Super Conforming. There are other names like Agency Jumbo and Jumbo Conforming which I feel do nothing but confuse consumers. But if you see these other names, they all refer to the same thing. It’s also worth noting that the overwhelming majority of press reports on weekly ‘average mortgage rates’ refer to conforming loans up to $417k.
This week is light on economic data , so market movement will depend largely on corporate news and then economic data is back in full force next week with retail sales, CPI, and consumer confidence. Nevertheless, mortgage bonds are still very sensitive, so while we may not see .5%-per-day rate swings, don’t expect the volatility to disappear.
Conforming ($200,000 – $417,000) – NO POINTS
30 Year: 6.0% (6.15% APR)
15 Year: 5.625% (5.765% APR)
5/1 ARM: 6.25% (6.39% APR)
Super-Conforming ($417,001 to $729,750 cap by county) – NO POINTS
30 Year: 6.625% (6.765%)
Jumbo ($417,001 – $1,000,000) – NO POINTS
30 Year: 6.875% (7.025% APR)
7/1 ARM: 6.625% (6.765% APR)
5/1 ARM: 6.125% (6.275% APR)
Better rates available for select profiles. Loans shown have no points, no prepayment penalties. ARMs shown have option to pay interest-only for 10 years. Scenarios assume full doc pricing on purchase or rate/term refi (but not cash-out refi) loans for borrower with 720 FICO score or greater, at least 10% equity, and 6-12 months reserves left over after close (retirement assets counted at 70% of value for reserves). ARM rates adjust the first month after initial fixed period shown, and once per year thereafter until year 30. Adjusted rate calculated by adding 2.25% margin to 1yr LIBOR index at time of adjustment. At first adjustment LIBOR+margin cannot exceed start rate+5%, subsequent yearly adjustments can never be greater than 2% per year, total of all adjustments for 30yr life of loan can never exceed start rate+5%. This is not a loan commitment nor a loan guarantee, rates based on loan amount ranges shown and rates available at the time of production. Rates subject to change without notice. California Department of Real Estate license #01376428. Equal Housing Lender.