The mortgage marketplace is lush with good news this summer. Whether someone wants to finance or refinance, a lot of mortgage trends have lined up to greatly favor borrowers.
What do I mean? Let's look at some recent news items.
First, mortgage rates have generally fallen. According to Freddie Mac, a typical 30-year, prime, fixed-rate mortgage was priced at 3.66 percent at the start of June, a rate which fell to 3.43 percent by mid-August. A year ago, the same loan was priced at 3.93 percent. That's a full half percent drop during the past year, a very big deal, especially with rates so low in the first place.
Second, your odds of getting a loan are getting better. Ellie Mae says that 71.6 percent of all mortgage applications closed in July. That's the best close rate in the past year.
The reasons for the new and better closing rate are not entirely clear, but one idea is that lenders are getting more comfortable with new federal standards which went into effect last October. For instance, you must now get closing papers three days before settlement. If there are big changes to the mortgage, a new set of closing papers must be issued and another three-day period goes into effect. Is the rule holding up closings? Nope. According to Ellie Mae, the typical loan took 46 days to close last September before the rules went into effect and 46 days in July.
Third, homes are worth more – and that opens new refinancing opportunities.
Back in 2010 total homeowner equity in the U.S. amounted to $6.5 trillion. It sounds like a lot, but this was the time of depressed home values after the financial meltdown. Now Americans have $13 trillion in real estate equity, twice the 2010 total.
A July report from the Urban Institute found that on average, U.S. homeowners with a mortgage can now access equity worth $98,763, while those who own their homes free and clear had $171,972.
An important by-product of generally rising home prices is that many homes once underwater can now be refinanced. Figures from ATTOM Data Solutions says that 6.7 million homes remain seriously underwater. That's a big number, however this figure is much better than the 12.8 million underwater homes we had in 2012.
Summer Mortgage Rates
There's always a certain sadness when summer ends, but for mortgage borrowers, the good rates and financial conditions seen during the past few months may well continue.
"The 30-year fixed-rate mortgage averaged only 3.44 percent in July," said Freddie Mac in its August economic analysis. "That is the lowest monthly average since January 2013. The low mortgage rate environment is likely to continue, given the high level of uncertainty that is present in financial markets. Accordingly, we have lowered our projections for mortgage rates from last month. We lowered our 10-year Treasury rate forecast for 2016 by 10 basis points to 1.8 percent and our 2017 forecast by 30 basis points to 2.1 percent. Since mortgage rates closely follow 10-year Treasury yields, we have also reduced our 30-year fixed mortgage rate forecast for 2017 by 30 basis points to 3.7 percent."
If this projection is right, 2016 is set to be a very good year for borrowers, even after the summer months are long gone.