Freddie Mac reported on Wednesday that 30-fixed mortgages have dropped to the lowest level since early 2013, “3.625 percent plus .5 points.” But rates are really lower than that: a good loan can be had at 3.625 percent without the fractional point and probably a credit versus closing costs. Some cut-rate vendor might touch 3.50 percent (as of Thursday, February 11).
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Since the great mortgage crash (aka “the bubble”) blew in 2007, two types of mortgages disappeared, both long in use. Possibly held hostage in some Potomac River warehouse or nearby closet, but gone.
By “long in use,” I mean that these were not some Frankenstein creation during the bubble, but one as old as banking itself, probably recognizable in Caesar’s Rome, and the second very well-tested and successful since exactly 1980.
Trying to make sense of economic news and its effects on mortgages and home buyers and sellers feels more like a game of Chutes And Ladders than rational analysis. Heaven knows the Fed itself is confused. Interest rates fall on bad economic news because a slow economy does not generate inflation. But for low rates to be good news for housing, people need to have jobs and rising incomes.
Compressed verdict: mortgages are slightly higher than the 3.75 percent bottoms in the last two weeks, now close to 3.875 percent. But nothing has really changed: the Fed and the global economy are in a unique pickle, the outside a mess, the U.S. economy plodding along.
Black Knight, the excellent data source and consultant to mortgage servicers, reported yesterday, “In Q3 2015, 42 percent of all first lien refinances involved a cash-out component, the highest share since 2008. Likewise, the average cash-out amount — over $60,000 — is the highest since 2007.” Sounds reasonable. But little in mortgageland is reasonable.