December 27th, 2011

The bond market closed last week trading down (- 66 bps).  Interest rates/pricing rose last week by approximately .5% in costs.  This week will likely remain stable but we could see further rate increases next week. 

I expect rates to rise in 2012, and here are a few things that will likely affect interest rates and the US markets during the upcoming year. 

1.)    HR3630  is new bill likely to pass in Congress very soon.  The bill increases guaranteed fees on Fannie Mae and Freddie Mac loans (the vast majority of loans written in the USA) up 10 basis points.  FHA will also increase it’s annual mortgage insurance 10 basis points.  These price hikes will be passed on to the consumer, pushing the closing costs you pay for a new mortgage higher.  Since Fannie Mae, Freddie Mac, and FHA are all run by the government now, these price increases are likely being put in to place so the government does not have to increase the employment tax.  So instead of employees paying higher taxes for unemployment expenses and social security – mortgage borrowers will instead. 

2.)     The majority of economists (Based on an Associated Press Poll) feel that the US economy will start to grow faster in 2012.  The economy has created at least 100,000 new jobs in the past 5 months straight.  People applying for unemployment benefits are at their lowest levels since April of 2008. 

Economists predict jobs creation to increase even more in 2012.  Even though the projections for job growth are higher, experts predict the unemployment rate to stay near 8.4%.  The new jobs are only cancelling out population increase. 

3.)     Europe still remains a constant concern.  A default in the Europe debt situation could cause major ramifications to the US Economy. 

With the economy likely to improve in 2012 – we will likely see the stock market improve and investors moving their money from the bond market and into the stock market.  This should create higher pricing on mortgages. 

Unless a default happens in Europe (which will trigger investors to move funds back into the safety of the bond market), interest rates are very likely to rise in 2012. 

Below are rates available today paying a point or less:

30 year fixed: 4% paying .51 points, 4.25% paying 0 points

20 year fixed: 3.875% paying .68 points, 4.125% paying 0 points

15 year fixed: 3.25% paying .9 points, 3.5% paying 0 points

5/1 ARM: 2.625% paying ..74 points; 3% paying 0 points

7/1 ARM: 2.875% paying .91 points, 3.25% paying 0 points

30 year fixed High Balance Loan: 4.25% paying .49 point, 4.375% paying 0 points

30 year fixed FHA: 3.75% paying .36 points, 3.875% paying 0 points

15 year fixed FHA: 3.25% paying .13 points; 3.375% paying 0 points

30 year fixed VA: 3.75% paying 0 points

Today’s Mortgage Interest Rates.  Current Mortgage Rates and APRs for refinancing and purchasing in Arizona, California, and Colorado.  Mortgage Rates Sheets for fixed mortgages, ARM mortgages, Variable Mortgages, Interest Only Mortgages, HARP mortgages, HARP 2.0 mortgages, DU Refi Plus Mortgages, Freddie Mac Open Access Mortgages, Freddie Mac Foreclosure Relief Mortgage, VA mortgages, VA Interest Rate Reduction Loans, FHA mortgages, FHA streamline mortgages, Conforming mortgages, Conventional Mortgages, High Balance Mortgages, Fannie Mae mortgages, Freddie Mac Mortgages,  and Jumbo Mortgages.

Mortgage Rates likely to rise in 2012