Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) released its tell-all survey of mortgage rates today, finding that lenders were offering 30-year fixed rate mortgages at an average unseen in two years. Last week saw rates averaging 4.4% but they have since jumped t0 4.58% according to today’s report.
Treasury notes responsible for rise in mortgage rates
Freddie Mac / Federal Home Loan Mortgage Corp (OTCBB:FMCC) reported today that the average for the 15-year fixed loan, the most popular alternative for people refinancing mortgages, was 3.6%, up from 2.89% at this time a year ago. This represents a gain of 0.3% from last week.
Since the yield on the 10-year Treasury note is largely responsible for fixed mortgage rates, the rise in 30-year fixed rate mortgages is indicative of analysts’ largely held belief that the Fed will begin pulling back on its stimulus program later this year, with many believing that this is reining in a program that has seen the Federal Reserve buying $85 billion a month in Treasury bonds and mortgage-backed securities. This, of course, has created a demand that has kept interest rates at all time lows for some time.
Fed to pull back on bond buying program
Late July saw the 10-year note bottom out in late July at roughly 1.4%. While minutes from the Fed’s last policy meeting released last week showed that officials had not determined exactly when to pull back its bond purchases, the yield began a steep rise on 10-year notes beginning last week and was sitting at 2.9% early this morning.
While the rising rates may move potential homebuyers into the market now before rates continue even higher, this demand on purchase mortgages has not made up for the sharp decline in refinancings that have seen huge job cuts in the mortgage departments of the nation’s largest lenders. The higher rates have markedly reduced any ability for many to refinance and when combined with the ebb in foreclosures and defaults, mortgage workers are feeling the bite.
Yesterday, Wells Fargo, the biggest home lender, told 2,300 of its mortgage employees that their services wouldn’t be required in 60 days time, citing a lull in refinancing this year, and a steep drop from last year.
JPMorgan to cut mortgage-related jobs
JPMorgan Chase & Co. (NYSE:JPM), the no. 2 mortgage lender, said two weeks ago that it would eliminate 3,000 mortgage-related jobs.
While both lenders have said that they will work to keep these employees on their payrolls by moving them into other departments, for many this will come as little comfort.