As Freddie Mac Reports An Uptick In The 30 Year Mortgage Rate, Have Mortgage Rates Hit A Floor?
Is the floor in mortgage rates in? After hitting a record all time low of 4.19% in the week ended October 14, the Freddie 30 Year Fixed mortgage rate has risen slightly but appreciatively to 4.21% (chart below). This is not all that surprising considering the 10 Year UST has been meandering around the 2.5% spot for a while now. What it does indicate, however, is that absent QE2 mortgages may have just hit their floor for the current regime. As it is no secret the Fed is intent on lowering mortgage rates as low as possible the question becomes whether a level in the low 4%'s is enough for mortgage activity to finally pick up.
Rosenberg, who chimed in on the rate conundrum doesn't think so.
So here we have this completely bizarre situation where even with market interest rates at historic lows, mortgage applications for new home purchases — the root of housing demand — slid 6.7% during the week ending October 15, on top of the 8.5% decline the prior reporting week and the level is back to its lowest in nine months, at 169.7. In “normal” times, the level of mortgage rates would have translated into a purchase index closer to 400, more than double where it is today. The Fed may well be able to drag bond yields and hence mortgage rates down even more, but the reality is that the central bank has no tools to deal with a total shift in household attitudes regarding debt, discretionary spending and homeownership.
As an aside, the purchase index is down 50% on a 26-week annualized basis, and from a year ago, purchases are down 37%. Incredible.