Interest rates move down to new 2014 lows

Interest rates for buying a home on the Palos Verdes Peninsula moved to new 2014 lows.The following are excerpts from the newsletter on interest rates published by HSH Associates :

“It was just about a year ago when Federal Reserve Chairman Ben Bernanke revealed that the Fed would eventually stop purchasing Treasuries and Mortgage-Backed Securities. In the weeks that ensued, mortgage rates bounded higher, eventually totaling a rise of about 120 basis points from 2013 bottoms, crushing refinance activity and leaving investors wondering just how quickly the Fed would end QE and short-term rates would begin to be lifted.

Since then, we’ve had all manner of items of concern to move markets, both political and economic. We seen a U.S. economy vacillate from better than a 4 percent GDP rate to a near standstill pace, and the size of the QE program approximately halved. Despite a jubilant stock market and seemingly improving fortunes for the U.S. economy of late, an accumulation of perhaps more economic gloom than sunshine over the last few months has seemed to diffuse from the market concerns of any immediate or even near-term rise in rates. The Federal Reserve continues to make soothing noises about the future trajectory for the interest rates it directly controls, and markets appear to be becoming more trusting of that message. Average mortgage rates are more than third of a percentage point below where they began 2014, and have now trimmed off a full third of last year’s outsized rise, standing only 79 basis points above the near 60-year lows of last May.

“Despite low mortgage rates, the housing market cannot seem to gain any traction. Lending conditions remain tight, most especially for more marginal borrowers and those who cannot meet rigorous underwriting requirements. Depending upon the source, the mortgage process has become so onerous as to see upwards of 40 percent of folks eschewing it altogether, preferring instead to pay cash. Reports indicate that this includes both investors (although to a lessening degree) as well as foreign buyers and retirees.

For at least the moment, the lowest mortgage rates of 2014 are with us. Markets appear content to ignore the good economic news (which would tend to push rates higher) in favor of focusing on the challenges we still face, with enthusiasm tempered at all times by concerns over the slower growth pattern in China and the tense political situation in the Ukraine.

Belying the decrease in mortgage rates this week, underlying yields for 10-year Treasuries have actually been pretty flat for the past five days, so rates would seem to be likely to at least start the week on a flat note. Given the lack of movement in an upward direction despite a litany of better data over the last month or two, it seems likely, and rates probably don’t shift much, maybe up or down by a couple of basis points next week. As we mentioned in the last MarketTrends, we can’t help the feeling that pressure is building for an upward move at some point, perhaps before long”

The following are interest rate quotes from American California Financial: