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Current Mortgage Rates Hold Steady

Mortgage rates were a mixed bag this week, with the 30-year rate unchanged, the 15-year rate moving higher and the 5/1 ARM ticking lower.

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This article was originally published by Money

The average interest rate on a 30-year fixed-rate mortgage was 3.10% for the week ending November 24, according to Freddie Mac. Today’s rate is unchanged from last week and market the second week in a row where the benchmark 30-year rate has stayed above 3%.

Other loan types saw some movement. The average rate for a 15-year fixed-rate loan moved up to 2.42%, while the rate for a 5/1 adjustable-rate mortgage dipped to 2.47%

Mortgage interest rates for the week ending November 24, 2021

Mortgage rate trends

Mortgage Rate Trend Chart for November 23

The average rate for the 30-year loan held steady while the 15-year rate increased and the adjustable mortgage rate fell:

  • The current rate for a 30-year fixed-rate mortgage is 3.10% with 0.7 points paid, remaining unchanged from last week. Last year, the average rate was 2.72%
  • The current rate for a 15-year fixed-rate mortgage is 2.42% with 0.7 points paid, ticking up by 0.03 percentage points week-over-week. The average rate was 2.28 during the same week last year.
  • The current rate on a 5/1 adjustable-rate mortgage is 2.47% with 0.3 points paid, down just 0.02 percentage points from last week’s average. The 5/1 ARM rate averaged 3.16% during the same week last year.

“Despite the noise around the economy, inflation and monetary policy, mortgage rate volatility has been low,” said Sam Khater, Freddie Mac’s chief economist in a statement. “For most of 2021, mortgage rates have stayed within half a percentage point, which is a smaller range than in past years.”

Today’s mortgage rates and your monthly payment

The rate on your mortgage can make a big difference in how much home you can afford and the size of your monthly payments.

If you bought a $250,000 home and made a 20% down payment — $50,000 — you would end up with a starting loan balance of $200,000. On a $200,000 home loan with a fixed rate for 30 years:

  • At 3% interest rate = $843 in monthly payments (not including taxes, insurance, or HOA fees)
  • At 4% interest rate = $955 in monthly payments (not including taxes, insurance, or HOA fees)
  • At 6% interest rate = $1,199 in monthly payments (not including taxes, insurance, or HOA fees)
  • At 8% interest rate = $1,468 in monthly payments (not including taxes, insurance, or HOA fees)

You can experiment with a mortgage calculator to find out how much a lower rate or other changes could impact what you pay.

Other factors that determine how much you’ll pay each month include:

  • Loan Term: Choosing a 15-year mortgage instead of a 30-year mortgage will increase monthly mortgage payments but reduce the amount of interest paid throughout the life of the loan.
  • Fixed vs. ARM: The mortgage rates on adjustable-rate mortgages reset regularly (after an introductory period) and monthly payments change with it. With a fixed-rate loan payments remain the same throughout the life of the loan.
  • Taxes, HOA Fees, Insurance: Homeowners insurance premiums, property taxes and homeowners association fees are often bundled into your monthly mortgage payment. Check with your real estate agent to get an estimate of these costs.
  • Mortgage Insurance: Mortgage insurance costs up to 1% of your home loan’s value per year. Borrowers with conventional loans can avoid private mortgage insurance by making a 20% down payment or reaching 20% home equity. FHA borrowers pay a mortgage insurance premium throughout the life of the loan.
  • Closing Costs: Some buyers finance their new home’s closing costs into the loan, which adds to the debt and increases monthly payments. Closing costs generally run between 2% and 5% and the sale prices.

The latest information on current mortgage rates

Will current mortgage rates last?

Mortgage rates stayed the same ahead of the holiday weekend, with the 30-year average holding at 3.10%.

As the end of the year approaches, it seems that interest rates will follow expert forecasts and stay slightly higher than 3%. Treasury yields are moving higher, which in turn are helping to keep mortgage rates above the 3% mark.

Looking ahead over the next few weeks, it seems likely that rates will continue to remain fairly steady, with no significant movement in either direction.

On Wednesday, the yield on the 10-year Treasury note opened at 1.665%, even with Tuesday’s close of 1.665%. There tends to be a spread of about 1.8 percentage points between the 10-year Treasury and average mortgage rates. Yields have been on a steady upward trend since last Thursday, which could indicate that mortgage rates will follow suit.

How are mortgage rates impacting home sales?

Mortgage applications increased 1.8% for the week ending November 19, according to the Mortgage Bankers Association. The rise was fueled by more people seeking out purchase loans compared to refinance loans.

  • Purchase applications were 5% higher than the previous week and only 4% behind last year’s pace.

“Purchase activity increased for the third straight week, as housing demand remains robust, even as the housing market approaches the typically slower holiday season,” said Joel Kan, associate vice president of economic and industry forecasting for the MBA.

  • Refinance applications ticked up 0.4% week-over-week. Compared to the same time last year, refi’s were down by 34%.

Current Mortgage Rates Guide

What is a good interest rate on a mortgage?

Today’s mortgage rates are near historic lows. Freddie Mac’s average rates show what a borrower with a 20% down payment and a strong credit score might be able to get if they were to speak to a lender this week. If you are making a smaller down payment, have a lower credit score or are taking out a non-conforming (or jumbo) mortgage, you may see a higher rate. A good mortgage rate is one where you can comfortably afford the monthly payments and where the other loan details (such as the length of the loan, whether the rate is fixed or adjustable and other fees) fit your needs.

How much does the interest rate affect mortgage payments?

In general, the lower the interest rate the lower your monthly payments will be. For example:

  • If you have a $300,000 fixed-rate 30-year mortgage at 4% interest, your monthly payment will be $1,432 (not including property taxes and insurance). You’ll pay a total of $215,608 in interest over the full loan term.
  • The same-sized loan at 3% interest will have a monthly payment of $1,264. You will pay a total of $155,040 in interest — a savings of over $60,000.

You can use a mortgage calculator to determine how different mortgage rates and down payments will affect your monthly payment. Consider steps for improving your credit score in order to qualify for a better rate.

How are mortgage rates set?

Lenders use a number of factors to set prevailing rates each day. Every lender’s formula will be a little different but will take into account things like the current Federal Funds rate (a short-term rate set by the Federal Reserve), competitor rates and even how much staff they have available to underwrite loans.

In general, rates track the yields on the 10-year Treasury notes. Average mortgage rates are usually about 1.8 percentage points higher than the yield on the 10-year note. Yields matter because lenders don’t keep the mortgage they originate on their books for long. Instead, in order to free up money to keep originating more loans, lenders sell their mortgages to entities like Freddie Mac and Fannie Mae. These mortgages are then packaged into what are called mortgage-backed securities and sold to investors. Investors will only buy if they can earn a bit more than they can on the government notes.

Why is my mortgage rate higher than average?

Not all applicants will receive the very best rates when taking out a new mortgage or refinancing. Credit scores, loan term, interest rate types (fixed or adjustable), down payment size, home location and the loan size will all affect mortgage rates offered to individual home shoppers.

Rates also vary between mortgage lenders. It’s estimated that about half of all buyers only look at one lender, primarily because they tend to trust referrals from their real estate agent. Yet this means that they may miss out on a lower rate elsewhere.

Freddie Mac estimates that buyers who got offers from five different lenders averaged 0.17 percentage points lower on their interest rate than those who didn’t get multiple quotes. If you want to find the best rate and term for your loan, it makes sense to shop around first.

Should you refinance your mortgage when interest rates drop?

Determining whether it’s the right time to refinance your home loan or not involves a number of factors. Most experts agree you should consider refinancing if your current mortgage rate exceeds today’s mortgage rates by 0.75 percentage points. It doesn’t make sense to refinance every time rates decline a little bit because mortgage fees would cut into your savings. You also have to consider whether your credit score would qualify you for today’s best refinance rates.

Many online lenders can give you free rate quotes to help you decide whether the money you’d save in interest charges justifies the cost of a new loan. Try to get a quote with a soft credit check which won’t hurt your credit score.

You could increase interest savings by going with a shorter loan term such as a 15-year mortgage. Your payments will be higher, but you could save on interest charges over time and you’d pay off your house sooner.

Should you buy mortgage points?

Many lenders sell mortgage points (also known as discount points). Buying points means you’d pay more up front to lower your mortgage rate which could save you money long-term. A mortgage discount point normally costs 1% of your loan amount and could shave 0.25 percentage points off your interest rate. (So, with a $200,000 mortgage loan, a point would cost $2,000.) Discount points only pay off if you keep the home long enough. Selling the home or refinancing the mortgage before you break even would short circuit the discount point strategy.

In some cases, it makes more sense to put extra cash toward your down payment instead of discount points If a larger down payment could help you avoid paying PMI premiums, for example.

How to shop for the best mortgage rate

Shopping around for the best mortgage rate can not only help you qualify for a lower rate but also save you money. Borrowers who get a rate quote from one additional lender are able to save $1,500 over the life of the loan, according to Freddie Mac. That number goes up to $3,000 if you get five additional quotes.

The best mortgage lender for you will be the one that can give you the lowest rate and the terms you want. Your local bank or credit union is one place to look. Online lenders have expanded their market share over the past decade and promise to get you pre-approved within minutes.

Shop around to compare rates and terms, and make sure your lender has the loan option you need. Not all lenders write USDA-backed mortgages or VA loans, for example. If you’re not sure about a lender’s credentials, ask for its NMLS number and search for online reviews.

Summary of current mortgage rates

Mortgage rates were a mixed bag this week, with the 30-year rate unchanged, the 15-year rate moving higher and the 5/1 ARM ticking lower:

  • The current rate for a 30-year fixed-rate mortgage is 3.10% with 0.7 points paid, remaining unchanged from last week. Last year, the average rate was 2.72%
  • The current rate for a 15-year fixed-rate mortgage is 2.42% with 0.7 points paid, ticking up by 0.03 percentage points week-over-week. The average rate was 2.28 during the same week last year.
  • The current rate on a 5/1 adjustable-rate mortgage is 2.47% with 0.3 points paid, down just 0.02 percentage points from last week’s average. The 5/1 ARM rate averaged 3.16% during the same week last year.






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Economics

Bitcoin Isn’t Any More Dangerous than the Euro

Major representatives of the European Central Bank—including ECB president Christine Lagarde—continue to warn against bitcoin. In a recent article,…

Major representatives of the European Central Bank—including ECB president Christine Lagarde—continue to warn against bitcoin. In a recent article, addressed to the inflation-adverse German audience, the ECB representative Klaus Masuch together with the former ECB chief economist Otmar Issing has stressed five risks of bitcoin: a lack of intrinsic value, risks to financial market stability, the use in financing organized crime, high energy consumption, and the danger that taxpayers are held liable for financial risks. It is good that the ECB wants to protect us against possible risks, but a comparison between bitcoin and the euro in the five points mentioned should be allowed.

First, the authors write that bitcoin has no intrinsic value, i.e., no direct use value as gold does, for example (see also Thiele 2017). This is true, but some value arises from the fact that bitcoin makes electronic transactions possible without a bank account (peer to peer). The euro also has no intrinsic value; at best it has value in the form of the burning value of the notes and the metal value of the coins. Euro credit money has been backed by the investment projects it has financed, but the persistently loose monetary policy of the ECB is increasingly zombifying euro area enterprises. More and more private deposits at the commercial banks are backed by the commercial banks’ deposits at the central bank instead of credit-financed investment.

Bitcoin per Euro

Source: Reuters.

Thus, the trust in the two currencies depends on how credible they are, with this question being strongly linked to the restraints on the supply of the currencies. The number of bitcoins is credibly limited to a maximum of 21 million. Bitcoin miners have to do substantial work to create bitcoin (proof of work). The necessary efforts increase with the number of bitcoins created.

The supply of euros was intended to be limited by the ECB’s objective of price stability as outlined in article 127 of the Treaty on the Functioning of the European Union (TFEU) as well as by the prohibition of government financing by the central bank (article 123 of the TFEU). But these rules seem to be increasingly undermined, as the ECB’s balance sheet continues to grow at a high speed. Moreover, it is less and less clear whether the government bonds and loans on the asset side of the ECB’s balance sheet—which match commercial banks deposits and euro bills issued on the liability side of the ECB’s balance sheet—are at risk of default. Therefore, confidence in the euro is dwindling and confidence in bitcoin is growing, with bitcoin strongly appreciating against the euro (despite strong fluctuations; see chart above).

Second, Masuch and Issing express concern that bitcoin could suddenly lose all its value and thus destabilize the financial system. This risk is low because the supply of bitcoin is limited and a large share of bitcoin is held decentrally. At best, financial instability may emerge if bitcoins are an essential part of a financial product (but see below). Perhaps for this reason, the German legislature has limited investment in bitcoins to special funds and there to a maximum of 20 percent.

On the other hand, the ECB creates risks to financial market stability, because the ultra-loose monetary policy is depressing risk premiums. Speculation and high levels of debt are encouraged, which can lead to new debt and financial crises. In addition, the ECB’s low, zero, and negative interest rate policy is squeezing banks’ interest rate revenues, thereby destabilizing many banks in the euro area. The risks for banks could grow further if the ECB itself issues a digital central bank currency and savers shift their deposits from the commercial banks to the central bank.

Third, the authors object that bitcoin can serve organized crime. Yet, money laundering and terrorist financing existed even before cryptocurrencies, which did not lead to criticism of or even bans on the dollar or the euro. Unlike transactions in fiat money, bitcoin transactions can be viewed on a public ledger (blockchain). Moreover, aren’t there currently concerns that parts of the EU reconstruction fund, which is indirectly backed by the ECB, could end up in the hands of the Italian mafia?

Fourth, there is criticism regarding bitcoin’s impact on the climate, as the energy consumption during production (mining) is high. However, bitcoin production is geographically independent. Bitcoins can be mined where electricity capacity is idle (and therefore cheap). Since electricity is difficult to store, bitcoin is a way to solve the problem of too much electricity (grid fluctuations).

Furthermore, it also takes energy and resources to create and distribute euros—whether in paper or electronic form. Unlike the decentralized bitcoin, the euro is maintained in a huge new fully air-conditioned skyscraper and nineteen national central banks with large numbers of highly paid staff. An extensive network of commercial banks distributes and stores euros in paper and electronic form. From this perspective, bitcoin seems very lean in terms of resource consumption.

Moreover, the ECB’s ultraloose monetary policy is unsustainable in its effect, as persistently low interest rates are boosting debt and consumption (Schnabl and Sepp 2020). The loss of confidence in the euro has triggered a flight into real assets, resulting in construction booms. Between 2003 and 2007, low ECB interest rates contributed to real estate bubbles in Spain and other southern euro area countries, which left many construction ruins in their wake. Since then, low interest rates have boosted construction activities in most euro area countries. From the perspective of Hayek’s overinvestment theory, the ECB’s persistently loose monetary policy is causing an unprecedented misallocation (and thereby waste) of resources (Schnabl 2019). As bitcoin is scarce, it helps to avoid such overinvestment booms.

Finally, concerns are expressed that a financial crisis triggered by a sharp drop in the value of bitcoin could force policymakers to offset losses in order to prevent a systemic crisis in the financial system. The warning against a suspension of the liability principle is justified. Everyone should invest and speculate at their own risk.

In line with the liability principle, the bitcoin network creates default risks on an individual level due to its decentralized nature. From this point of view, there is no systemic crisis. In contrast, in the financial system of the euro area, the liability principle was suspended with the bailout of banks and highly indebted euro states in the course of the European financial and debt crisis  back in 2008–12. Since Mario Draghi’s “whatever it takes,” the ECB has been keeping a growing number of highly indebted euro states fiscally stable with the help of extensive government bond purchases. Individual risks are thus socialized, thereby paralyzing growth.

The upshot is that the persistently loose monetary policy of the ECB and other central banks has led to a loss of confidence in the euro. This loss is not only reflected in rising bitcoin prices as well as in hiking stock prices, real estate prices, gold prices, etc. The ECB’s ongoing low, zero, and negative interest rate policy is leading to an immense misallocation and waste of resources, which is likely to dwarf the energy consumed by bitcoin mining by far. If bitcoin—via currency competition with the euro—helps to discipline the ECB’s monetary policy, then it makes an important contribution to both financial market stability and sustainability in the European Union.










Author: Gunther Schnabl

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Economics

“Perhaps This Is How Our Story Ends: A Run On The Dollar Takes Hold, The World’s Reserve Currency Collapses”

"Perhaps This Is How Our Story Ends: A Run On The Dollar Takes Hold, The World’s Reserve Currency Collapses"

By Eric Peters, CIO of One River…

“Perhaps This Is How Our Story Ends: A Run On The Dollar Takes Hold, The World’s Reserve Currency Collapses”

By Eric Peters, CIO of One River Asset Management

“To prepare for the future, we must first reimagine the past in a manner that central banks won’t,” said the CIO.

“So, what is it that central banks can’t imagine?” he asked, rhetorically.

“Can they imagine being both right and wrong? Right that the inflation potential of the system is low due to the persistence of deflationary forces that are now well known, but wrong because their actions – based on this belief in deflationary tendencies – unnerves depositors sufficiently that they want to get out of the currency,” he said, the S&P 500 still within a few percent of record highs, home prices surging, used car prices too.

“And can central banks also imagine technology being both deflationary and inflationary?” he asked.

“Deflationary for all the obvious reasons – just ask the shoeshine about artificial intelligence and productivity – and inflationary because social media can amplify inflationary fears, while financial technology enables more and more depositors to switch out of dollars at the tap of a button,” he explained, countless buy and sell orders from a whole new generation of day traders, addicted to Robinhood, swirling in the cloud.

“It could be the currency equivalent of a bank run in the 19th century when the mere rumor – true or false – of a bank losing its gold reserves, could set off a run,” he said, a student of the rich history of financial booms, busts, panics.

“So, can these two paradoxes combine to take out a reserve currency?” he asked, concerned less by the immediate market risks, but rather, what happens when the next big equity market decline forces the Fed to ease policy while inflation remains robust.

“Perhaps this will be how our story ends. A run on the dollar takes hold, the world’s reserve currency collapses,” he said.

“It’s the explosive ending central bankers can’t imagine.”

Tyler Durden
Mon, 12/06/2021 – 08:35








Author: Tyler Durden

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Economics

Euro yawns after soft German data

The euro has started the week quietly and is trading just below the 1.13 level. German Factory Orders slide It wasn’t a great way to start the week,…

The euro has started the week quietly and is trading just below the 1.13 level.

German Factory Orders slide

It wasn’t a great way to start the week, as German Factory Orders contacted in October.  News orders fell by -6.9% m/m and -1.0% y/y, respectively. The weak numbers are a result of health restrictions in Germany, which has been hit by a fourth wave of Covid and is seeing a sharp uptick in the number of Covid cases. Investors shrugged at the weak data, as Germany’s manufacturing sector is in decent shape. The November Manufacturing PMI came in at 57.4, which points to significant expansion. Still, if the pandemic worsens and the government responds with more severe restrictions, manufacturing could lose steam.

Eurozone inflation is running at a 4.9% clip, but some investors have expressed concern that ECB President Christine Lagarde has been too sanguine about the jump in inflation. Lagarde has said that inflation is under control and a result of temporary factors such as high energy prices, but many market participants are sceptical of her stance. Some ECB members have stated that inflation may not ease as quickly as expected. This view was reiterated last week by Luis de Guindos, vice-president of the ECB. There is growing pressure on the ECB to reduce its monetary stimulus, but the upcoming meeting may be a sleeper, with Lagarde signalling that there won’t be any major changes at next week’s policy meeting.

In the US, non-farm payrolls was very disappointing, with a reading of 210 thousand new jobs. This was nowhere near the consensus of 534 thousand. The soft reading was cushioned by a sharp drop in the unemployment rate, which fell from 4.6% to 4.2%. This was a result of a household employment report which showed some 1.1 million jobs at been created. If you’re confused about the conflicting data, no worries – the expert are as well. These two employment reports often diverge sharply, and the true state of the labor market lies somewhere in the middle.

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 EUR/USD Technical

  • EUR/USD has support at 1.1236 and 1.1163
  • The next resistance lines are 1.1383 and 1.1457



Author: Kenny Fisher

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