Freddie Mac Issues Warning As Mortgage Rates Soar

Tyler Durden's picture

Blink, and you missed your chance to refi. And according to nationalized mortgage giant Freddie Mac, it's about to get worse.

As shown last week, as a result of the recent spike in yields, the population of eligible refinance candidates has already plunged by more than half. As Black Knight pointed out, as of the end of November, though there are still 2M borrowers who could save $200+/month by refinancing and a cumulative $1B/month in potential savings, this is less than half of the $2.1B/ month available just four weeks ago.

Since then the number has shrunk substantially as rates have continued their relentless move higher.

According to the latest Wells Fargo refi rates, a 30 Year Fixed mortgage will now cost a prospective creditor some 4.625%. This was in the mid-3%s just a few months ago.

 

It was not just refis: according to the latest Freddie Mac update, the 30 Year Fixed has jumped to 4.16%, from 3.94% just a month ago, and 3.5% as of early October.

As Freddie notes in its latest press release, this week's mortgage rate survey was completed prior to the FOMC announcement. The 30-year mortgage rate rose 3 basis points on the week to 4.16 percent. The MBA's Applications Survey posted drops in both refinance and purchase applications, registering the impact of recent mortgage rate increases.

Some details:

  • 30-year fixed-rate mortgage (FRM) averaged 4.16 percent with an average 0.5 point for the week ending December 15, 2016, up from last week when it averaged 4.13 percent. A year ago at this time, the
  • 30-year FRM averaged 3.97 percent.
  • 15-year FRM this week averaged 3.37 percent with an average 0.5 point, up from last week when it averaged 3.36 percent. A year ago at this time, the 15-year FRM averaged 3.22 percent.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.19 percent this week with an average 0.4 point, up from last week when it averaged 3.17 percent. A year ago, the 5-year ARM averaged 3.03 percent.

But more troubling was Freddie's explicit warning, that "if rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017."

Which we find strange, because the catalyst that sent stocks soaring on Thursday, was the latest NAHB homebuilder optimism report, which jumped to the highest level since 2005, rising by the most in over a decade which the NAHB said was "largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability.

While we understand builders enthusiasm about Trump, we hate to break it to them that without a viable mortgage market, optimism will quickly turn to pessimism. Then again, as the current "Trumpflation euphoria" phase continues, brushing off any potential headwinds, logic doesn't much matter for now.

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Seasmoke's picture

My Gold stack might be looking a little less shiny today, but my 3 5/8 sure looks pretty good. 

HedgeJunkie's picture

It's the annual dance of the gold bears.

My hope is that gold drops to below $1k and stays there for a couple weeks.

I have a small wad due during the next few weeks and plan to go shopping.

847328_3527's picture

Wall Street, DC and Bankers learned their lesson.

Since everyone is required to 1) put 20% down and 2) have solid creidt and 3) have a job, the consequences should not be too painful.

...oh, wait a second...

buzzkillb's picture

That was 2012 when all cash buyers were eating at the housing buffet, and 20% down with a job got you at the end of the table. Not looking forward to NINJA fog a mirror loans again. Countrywide is still around as OneWest Bank.

JRobby's picture

Wells was in there slugging it out toe to toe with Countrywide. Same products, rates and borrower profile matrix.

I still have some of the rate sheets that prove it.

Wells' situation was kept quiet. They got Wachovia.

Chase got Wamu.

 

Ghost of Porky's picture

Anybody doing business with Wells after the recent outrage is an idiot.

24Richie's picture

Countrywide was acquired by Bank of America.  OneWaest acquired IndyMac.

ultraticum's picture

Home Mortgage =

Dealing with stupid retail banksters and forms =

paying exorbitant hazard insurance that goes up 12%/year even if you don't have a single claim in 20 years =

Playing into the hand of an exponential fiat/fractional money-creation curve that can NEVER turn down =

DEBT SLAVERY

I hope rates go to 10% and beyond . . . and with that real estate bubble collapses precipitously . . . and with that the greedy extortionist Assessor takes a big haircut . . . and with that the din do nuffins at city hall get a massive headcount reduction . . . and hard working savers are FINALLY allowed to deploy their accumulated labor.

JRobby's picture

"Laugh Track Deafening "

Foreclusure wave 2.0

Nothing has been fixed. Nothing.

 

Life of Illusion's picture

 

WHERE DO THEY GET THEIR FUNDS FROM????????

RIGHT ........GOV

TRY AND SELL THAT SHIT PAPER TO PRIVATE OPEN MARKET BIDDING WITH NO GOV BACKING

WASH THIS FUCKER DOWN OR NO REAL MARKET RECOVERY...FOR YEARS

 

spastic_colon's picture

why do i feel your answer is in here somewhere? and why I feel like this is a hidden bailout of foreign banks by the US thru the IMF?  even tho it goes a long way to say its not.  sorry for the font i have the basic membership.

 

Federal Reserve Board adopts final rule to strengthen the ability of government authorities to resolve in orderly way largest domestic and foreign banks operating in the United States

 


Life of Illusion's picture

 

Thanks for link

Meaning  GSIB’s cannot fail today.

 

 So, a 2019 plan to implement an orderly safe BK without risk to public.

they have FSB https://en.wikipedia.org/wiki/Financial_Stability_Board 

and FSOC https://www.treasury.gov/initiatives/fsoc/Pages/home.aspx  with powers GRANTED TO TREASURY AND FED (SEE IF TRUMP USES SUCH POWERS)

 

SO (YELLEN) HAS (NO) PLAN?.

AS TYSON SAYS

EVERYONE HAS A PLAN TILL THEY GET PUNCHED IN THE MOUTH

 

Rockatanski's picture

have the real gold miners ceased operations in this stupid low market yet?

was the current cost of getting gold out of the ground and to our diner plate around $1100-1200?

Bill of Rights's picture

3 and 5/8ths? hope your not looking down at your Johnson...

JRobby's picture

The 5/8, 3/8 etc. Bullshit is because they know most people can't convert fractions to decimals (they were passed along by "No Child Left Behind). Fractions are a marketing game.

Back to your question: yes, they posted it so clearly it is only 3 5/8 ths" a full 2" plus less than the world average. Its what they do.

abyssinian's picture

Warning of what? Dow going to 30,000? Just borrow more against the house the buy stocks.  Just like in 2007, borrow against the house and buy another house..

HRH Feant's picture
HRH Feant (not verified) Seasmoke Dec 15, 2016 2:28 PM

Assumable 2.875 30-year fixed here. I doubt I will ever see a rate like that for the rest of my life. When I decide to sell (and buy again) that good 'ol assumable VA loan is going to be the hottest ticket in town!

Colonel Klink's picture

Provided you choose to have your benefits tied up under the assumption, unless the buyer has a VA eligibility to substitute of their own.

PoasterToaster's picture
PoasterToaster (not verified) Dec 15, 2016 12:04 PM

Step back and watch the banks get fucked.  Maybe the 2 big fascist banks will finally fail.

Hohum's picture

Then rates must be lowered!  How do we do that?

autofixer's picture

With a phone and a pen, of course. That's the new Amerikan way.  

Id fight Gandhi's picture

No doubt it will slow sales and refi and house prices will drop a bit.

 

But that's all factored into this rally.  Right?

Consuelo's picture

 

 

 "...which the NAHB said was "largely attributable to a post-election bounce, as builders are hopeful that President-elect Trump will follow through on his pledge to cut burdensome regulations that are harming small businesses and housing affordability.

 

What was that saying again - 'hope' in one hand and spit (or was it Shit?) in the other...

Soul Glow's picture

Dumb americans will be buying houses until the prices collapse.  People buy in a herd, and will buy until the herd has run off the cliff.  

This is how real estate agents will make their pitches this year...."Rates are going higher and you'll have to lock in the low rate now!"

WHat's wrong with this is a few things.  First, people will somehow take this under consideration and still use ARM loans.  Second if rates rise prices will go lower but the agent will combat that by saying, "But this is your dream house and you will live here for 20 - 30 years and the price will go up eventually."  This is retarded because no one ever knows exactly how long they will live in a house.  Divorce, bankrupcy, changing job, these could all happen.

But somhow people will still buy the top.  This because the general population are retarded.  Plain and simple people are retarded by their nature.

saveUSsavers's picture

$500/sq ft around here PIECE OF SHIT 2K sq ft houses =do the math! most insane FOMO ever seen, worse than 2005-6, young couples in 30s OVERPAYING OF A LIFETIME !

spastic_colon's picture

old age and treachery beat youth and ignorance every time........smart people sell to dumb people alot.

ItsSnowingInColorado's picture

It’s the only place where you can borrow money for a down payment, get a 1st and 2nd mortgage and call yourself a homeowner.

Widespreadpanic's picture

Not much could make me happier than to see the sleazy real estate agents and pushy mortgage brokers experience another shit year.

Defaults and bank failures would be icing on the ginger-dead' house.

saveUSsavers's picture

First they repossess their fking overvalued cars (in progress)

The Ram's picture

Seems to me that the 'markets' (whatever they may be these days), are vastly underestimating the impact of higer rates.  We have lived in such a low rate environment for almost 10 years, so there will be mass dislocations of stuff as rates rise.  The Fed can only follow at this point.  Any timing on this from the peanut gallery?  When should we look to brace for impact??

Bunga Bunga's picture

Get the closet full of popcorn before it's too late.

nakki's picture

Come on rising rates are great for homebuilders now is the best time tob uy before 30 year mortgage rates go to 5.5%. Ninja loans to the rescue!!

Don't worry you'll still get nothing in interest from your bank.

buzzsaw99's picture

5.5% ooh, man, ouch. that would really fuck things up fast. of course it would hit the hitlarytards in california the hardest so it would be funny as hell. can you see them happily paying $5500 per year per $100K borrowed on their $1.1M shitshacks?

alpha-protagonist's picture

Bad news: market up
Good news: market up
No news: market up
Lower interest: home sales soar
Higher interest: home sales soar

How does one BTFD when there is none?

Consuelo's picture

 

 

 It's a fairly sobering thought when you think of the inception and growth of businesses like Home Depot, Lowes, etc., and all the 'trickle-down' that springs forth from cheap money, and what lies in store when that spigot shuts off.

saveUSsavers's picture

talk about inequality ? MORTGAGE INT DEDUCTION !

alpha-protagonist's picture

"The renters do get fucked with no vaseline."

angry_dad's picture
angry_dad (not verified) alpha-protagonist Dec 15, 2016 5:09 PM

fuck the renters, many are now  defaulting liar loan foreclosures.

angry_dad's picture
angry_dad (not verified) saveUSsavers Dec 15, 2016 5:02 PM

the mortgage deduction is nearly worthless in a low interest rate environment

it's a sucker's trap for the 99% to justify paying too much.

Déjà view's picture

One third of homeowners don’t have a mortgage, so the deduction wouldn’t apply to them. Many among lower- and middle-income families either don’t pay federal income tax or don’t itemize, so the deduction wouldn’t benefit them either.

“Only about 40 million (or 22.5%) of the 173 million households in the U.S. benefit from the mortgage interest deduction, according to the Tax Policy Center,” Olick wrote. And if, as Mnuchin suggested, Trump caps the deduction at $100,000, it still wouldn’t affect most borrowers, according to CNBC. On a $500,000 mortgage, the total annual interest payment would be about $23,000, well below the proposed cap.

http://www.mpamag.com/news/mortgage-interest-deduction-may-be-on-trumps-...

alpha-protagonist's picture

The spigot won't get shut off because the USA rewards bad behaviors. Banks get subsidized for risky bets. A decade ago, buy and bail was part of the home ownership vernacular as was pump and dump, rampant heloc abuse, etc. I'm not aware of one fucking person who was prosecuted for any of this...except maybe Mozillo. Went bankrupt? No problem, in three years you can buy again. Any fools -- like me -- who believes in fundamentals and the rule of law, are getting left behind. What has Facebook produced? What has Twitter produced? What has Yahoo produced? Vaporware with advertising revenues? Everyone was so quick to point the finger at Obama/Bernanke/Yellen/Dimon/Blankfein for steroidal market manipulation, but the mere election win for Trump has catapulted what is perceived to be, an already heated market!

Up is down, down is up and the spigot can continue to leak in perpetuity until all the resources are owned by the few.

EDIT: Personal consumption expenditures constitute 70% of GDP. The spigot can't be shut off...

BSHJ's picture

Would love to see interest on savings at about 5% and mortgage rates at about 12%.......then I might have some actual interest income plus home prices might come down to a more sane level.

Rockfish's picture

Now that sounds like 1984. the good ol days. I paid $42,000.00 for 3 bd town house +/- 1800 sqft  rate 13.5%. 

angry_dad's picture
angry_dad (not verified) BSHJ Dec 15, 2016 5:00 PM

100% correct

saveUSsavers's picture

KILL-OFF FREDDIE MAC !

roadhazard's picture

It's OK builder confidence is HIGH ... lol

Paul E. Math's picture

Free market principles would hold that higher mortgage rates push home prices down.

But I don't think anyone in power really believes in free markets anymore, other than to pay it lip service.

I fear the large monied interests that Trump has appointed to all his cabinet positions will find a way to short-circuit free markets and keep home prices rising with government intervention.

And this is precisely what homebuilders and banks are counting on.

angry_dad's picture
angry_dad (not verified) Paul E. Math Dec 15, 2016 5:07 PM

TRUMP  has already shown a willingness to walk away from bad loans when the terms are rendered bad for his business.

Solution; He makes a few calls to the bank and the loan is renegotiated for more favorable terms.

Happily for him, the obsolete us tax laws allowed him to write off $MILLIONS of losses decades ago, just like every other billionaire.

The big banks do the same thing, it's called a strategic default.

The best way to keep home pricing sane is to NEVER BAIL OUT A LOSER if they can't renegotiate when they are upside down.

The Ram's picture

So, higher home prices and higher interest rates?  Better bring back the liar loans and forget credit standards.  If you have the balls and can time things right, you buy much more than you can aford, immediately stop paying mortgage, and sit in your new free home for several years or more.  If they kick you out, and you really have balls, burn the fucker down to deny the bank any equity.  Rinse and repeat.