Interest rates edge up slightly again this week

Interest rates for buying a home on the Palos Verdes Peninsula moved up slightly again this week.The following are excerpts from the newsletter on interest rates published by HSH Associates :

“While much of the rest of the world continues to struggle with poor or poorer economic prospects, the U.S. is enjoying what finally seems to be solid, reliable growth. The upturn in fortune here has been erratic and unreliable at times, as was seen in the first quarter of 2014 and earlier periods in the beginning of the recovery. Of late, though, it seems to us that there is an increasing air of confidence that each new economic report will at least meet expectations, if not exceed them.

This may simply be a cautious (if growing) optimism about the U.S. economy’s ability to overcome external issues, or its future prospects; perhaps we simply have become more accustomed to the drumbeat of moderate reports and gradual expansion. That said, if the path we’re on is a gradual upward one, as it appears to be, interest rates will have a hard time holding recent lows, but will tend to move and remain above them. In fact, the panic of last month behind us, interest rates have returned to about where they were, and in all probability will again move to levels we enjoyed during the summer in the weeks ahead.

As anyone in the mortgage business will tell you, the issue these days continues to be not so much about the price of money (interest rates) but rather access to money (underwriting conditions) that is contributing to the sluggishness in housing markets. In recent days we have heard of forthcoming changes by the FHFA and the GSEs to “expand the credit box” or at least use more of it, but details have been sparse so far. To be fair, some lenders have backed off a bit on credit and LTV overlays this year, but any loosening of terms is happening almost solely in the portfolio-lending space, and that largely for jumbo borrowers. For the most part, tight conditions are easing modestly at best.

While mortgage rates are not near the emergency-level 60+ year lows we’ve seen at times over the last two years, they remain at levels historically both affordable and desirable. That will continue to be the case for some time yet, and if we can responsibly pry open the “credit box” to include more access to them, the housing market will have plenty of space to grow, even if rates tick higher over a long time window.

For next week, though, we will likely see a halt in the two-week uptick for rates. Bond markets were perhaps over-poised for an outsized employment report, but it didn’t come, and rates leveled off and even relaxed a bit on Friday. As such, and with a light week of fresh data on tap, we think rates will hold mostly steady, but may drift backwards by a couple of basis points.”

The following are interest rate quotes from American California Financial: