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Today’s Mortgage Rates Move Up | January 14, 2022

The average interest rate on a 30-year fixed-rate mortgage is slightly higher today, moving up 0.026 percentage points to 3.898%.

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This article was originally published by Money

The average interest rate on a 30-year fixed-rate mortgage is slightly higher today, moving up 0.026 percentage points to 3.898%. The 30-refinance rate is also higher, increasing to 4.037%.

While rates have generally trended higher over the past week, they are still low compared to the years prior to the pandemic. Competitive rates and comfortable monthly payments are still available to borrowers with strong credit planning on buying a home or refinancing their current mortgage.

  • The latest rate on a 30-year fixed-rate mortgage is 3.898%.
  • The latest rate on a 15-year fixed-rate mortgage is 2.91%. ⇑
  • The latest rate on a 5/1 ARM is 2.442%. ⇔
  • The latest rate on a 7/1 ARM is 3.781% ⇓
  • The latest rate on a 10/1 ARM is 4.017%. ⇓

Money’s daily mortgage rates reflect what a borrower with a 20% down payment and a 700 credit score — roughly the national average score — might pay if he or she applied for a home loan right now. Each day’s rates are based on the average rate 8,000 lenders offered to applicants the previous business day. Freddie Mac’s weekly rates will generally be lower, since they measure rates offered to borrowers with higher credit scores.

Today’s 30-year fixed-rate mortgage rates

  • The 30-year rate is 3.898%.
  • That’s a one-day increase of 0.026 percentage points.
  • That’s a one-month increase of 0.299 percentage points.

The long payback time and relatively low monthly payments make the 30-year fixed-rate mortgage the most popular home loan around. The fact that the interest rate and monthly payment won’t change are also advantages. However, compared to a shorter-term loan, the interest rate will be higher so you’ll pay more in interest over the full 30-year term.

Today’s 15-year fixed-rate mortgage rates

  • The 15-year rate is 2.91%.
  • That’s a one-day increase of 0.047 percentage points.
  • That’s a one-month increase of 0.341 percentage points.

Some borrowers prefer the shorter payback time and lower interest rate of a 15-year fixed-rate mortgage. However, the monthly payments will be higher than those on a longer-term loan, so this type of loan is only a good option if you can comfortably afford those higher payments.

The latest rates on adjustable-rate mortgages

  • The latest rate on a 5/1 ARM is 2.442%. ⇔
  • The latest rate on a 7/1 ARM is 3.781%. ⇓
  • The latest rate on a 10/1 ARM is 4.017%. ⇓

For borrowers who plan on either refinancing or selling their home within a relatively short period of time, an adjustable-rate mortgage could be a good option. The interest rate will be fixed at first and start out very low, before eventually resetting at set intervals. A 5/1 ARM, for example, will have a fixed rate for five years that will then adjust every year. The potential drawback of an ARM is that the rate could increase significantly once it starts adjusting.

The latest VA, FHA and jumbo loan rates

The average rates for FHA, VA and jumbo loans are:

  • The rate on a 30-year FHA mortgage is 3.667%. ⇔
  • The rate on a 30-year VA mortgage is 3.688%. ⇓
  • The rate on a 30-year jumbo mortgage is 3.555%. ⇔

The latest mortgage refinance rates

The average refinance rates for 30-year loans, 15-year loans and ARMs are:

  • The refinance rate on a 30-year fixed-rate refinance is 4.037%. ⇑
  • The refinance rate on a 15-year fixed-rate refinance is 3.045%. ⇑
  • The refinance rate on a 5/1 ARM is 2.737%. ⇔
  • The refinance rate on a 7/1 ARM is 3.922%. ⇓
  • The refinance rate on a 10/1 ARM is 4.165%. ⇓

Where are mortgage rates heading this year?

Mortgage rates sank through 2020. Millions of homeowners responded to low mortgage rates by refinancing existing loans and taking out new ones. Many people bought homes they may not have been able to afford if rates were higher. In January 2021, rates briefly dropped to the lowest levels on record, but trended slightly higher through the rest of the year.

Looking ahead, experts believe interest rates will rise more in 2022, but also modestly. Factors that could influence rates include continued economic improvement and more gains in the labor market. The Federal Reserve has also begun tapering its purchase of mortgage-backed securities and announced it anticipates raising the federal funds rate three times in 2022 to combat rising inflation.

While mortgage rates are likely to rise, experts say the increase won’t happen overnight and it won’t be a dramatic jump. Rates should stay near historically low levels through the first half of the year, rising slightly later in the year. Even with rising rates, it will still be a favorable time to finance a new home or refinance a mortgage.

Factors that influence mortgage rates include:

  • The Federal Reserve. The Fed took swift action when the pandemic hit the United States in March of 2020. The Fed announced plans to keep money moving through the economy by dropping the short-term Federal Fund interest rate to between 0% and 0.25%, which is as low as they go. The central bank also pledged to buy mortgage-backed securities and treasuries, propping up the housing finance market but began cutting back those purchases in November.
  • The 10-year Treasury note. Mortgage rates move in lockstep with the yields on the government’s 10-year Treasury note. Yields dropped below 1% for the first time in March 2020 and have been rising since then. On average, there is typically a 1.8 point “spread” between Treasury yields and benchmark mortgage rates.
  • The broader economy. Unemployment rates and changes in gross domestic product are important indicators of the overall health of the economy. When employment and GDP growth are low, it means the economy is weak, which can push interest rates down. Thanks to the pandemic, unemployment levels reached all-time highs early last year and have not yet recovered. GDP also took a hit, and while it has bounced back somewhat, there is still a lot of room for improvement.

Tips for getting the lowest mortgage rate possible

There is no universal mortgage rate that all borrowers receive. Qualifying for the lowest mortgage rates takes a little bit of work and will depend on both personal financial factors and market conditions.

Check your credit score and credit report. Errors or other red flags may be dragging your credit score down. Borrowers with the highest credit scores are the ones who will get the best rates, so checking your credit report before you start the house-hunting process is key. Taking steps to fix errors will help you raise your score. If you have high credit card balances, paying them down can also provide a quick boost.

Save up money for a sizeable down payment. This will lower your loan-to-value ratio, which means how much of the home’s price the lender has to finance. A lower LTV usually translates to a lower mortgage rate. Lenders also like to see money that has been saved in an account for at least 60 days. It tells the lender you have the money to finance the home purchase.

Shop around for the best rate. Don’t settle for the first interest rate that a lender offers you. Check with at least three different lenders to see who offers the lowest interest. Also consider different types of lenders, such as credit unions and online lenders in addition to traditional banks.

Also. take time to find out about different loan types. While the 30-year fixed-rate mortgage is the most common type of mortgage, consider a shorter-term loan like a 15-year loan or an adjustable-rate mortgage. These types of loans often come with a lower rate than a conventional 30-year mortgage. Compare the costs of all to see which one best fits your needs and financial situation. Government loans — such as those backed by the Federal Housing Authority, the Department of Veterans Affairs and the Department of Agriculture — can be more affordable options for those who qualify.

Finally, lock in your rate. Locking your rate once you’ve found the right rate, loan product and lender will help guarantee your mortgage rate won’t increase before you close on the loan.

Our mortgage rate methodology

Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States the most recent business day rates are available for. Today, we are showing rates for Thursday, January 13, 2022. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.

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Economics

Whither r*?

(Note: This article was delayed because of technical difficulties. I finally found a work around.)Although hand-wringing about Quantitative Easing and the “transitory-ness” of inflation is catching most people’s attentions, there is an interesting theo…

(Note: This article was delayed because of technical difficulties. I finally found a work around.)

Although hand-wringing about Quantitative Easing and the “transitory-ness” of inflation is catching most people’s attentions, there is an interesting theoretical concern that is about to get quite pressing. That is: what is up with r* (which is the modernised version of the “natural rate of interest,” although the word “natural” was finally dropped from the jargon). Although post-Keynesians generally argue that r* does not exist — so this is a non-issue — neoclassicals cannot easily embrace that position.

From what I have seen, various estimation techniques for the not-directly-measurable variables loved by neoclassical theory blew sky high during the pandemic, and I have not paid any attention to whether the techniques have since been patched. My assumption is that this is a major topic of interest for researchers, but I doubt that there will be a consensus fix this quickly.

I wrote about the problems with the Holsten-Laubach-Williams (HLW) estimation technique in this earlier article. The New York Fed website — which previously published the estimate — suspended updates when the pandemic data hit. The chart below what happened to the r* estimate based on the initial data in 2020. I have not updated the chart to include more recent data. As noted in my earlier text, one of the problems with the pandemic data is that it was so extreme that the previous estimates of r* were also mangled, since the fit was much worse than was the case for data ending in 2019.

Even if we do not know what neoclassicals think r* is supposed to be, we can what the real policy rate. Or at least we sort-of can, given that it is unclear what rate of inflation we are supposed to use to get the real rate.

The figure at the top of this article shows what I label as the “historic” real rate: the spot Fed Funds (I use the midpoint of the band) less core CPI. It started off with the same sort of mildly negative values we saw in the past cycle, then went deeply negative in 2021. Since it is hard to see the dates associated with the last plunge, the real policy rate started 2021 at around -1%, then first went below -4% in June (ending at -5.4% in December).

The problem with using the “historic” real rate (although it is common in analysis) is that we are comparing a forward-looking interest rate versus the past year’s percentage change in the CPI. In neoclassical models, the variables of interest are the policy rate, and the next period expected inflation rate.

Expectations Matter. Maybe.

The problem with “expectations” is deciding whose expectations matter. In neoclassical models, we just have a small number of representative households (often one) who are the only entities that matter, so you just need to survey them, since the uncountable infinity of other agents will just agree with whatever representative agent represents them. The problem in the real world is that we never seem to be able to pin down who exactly is the representative agent, and so we have an inconsistent mish-mash of inflation survey results.

The figure above shows the Fed Funds rate deflated by the inflation expectations component of the University of Michigan Survey. On that measure, the real rate started 2021 at -2.9% in January, and dropped below -4% in May, ending the year around -4.8%.

What is the problem that I see? If we look back at the (admittedly mangled by the outlier) HLW r* estimate, it was getting close to 0% at the end of 2019. The real rate based on the Michigan Survey started 2021 about 300 basis points below that, and ended up about 500 basis points lower at year end.

(The HLW algorithm uses a smoothed version of inflation — adaptive expectations! — so the inflation rates would presumably be lower in 2021, at the cost of being higher if and when inflation rates moderate.)

Lots of Stimulus

If we are to believe neoclassical theory, deviations of the real policy rate from r* ought to have a somewhat symmetrical effect on the economy. Unless r* magically moved a lot lower in 2021, there should have been a stimulative effect equivalent to hiking rates hundreds of points above r*.

And that is not all. We had a large fiscal stimulus — which is of course ignored in the HLW algorithm, because everyone knows fiscal policy does not matter — and there is whatever stimulative effect provided by the Fed’s balance sheet expansion.

If one believes neoclassical macro theory, then one should expect inflation to rip even higher in 2022. (Which does put the Fed’s stance into a curious light.) I cannot guarantee that will not happen, so we will need to wait and see. But if it does not, it does raise the question: does r* even exist?

Why Non-Existence Matters

The whole theoretical core of DSGE models are based on the assumption that households trade off future consumption versus the present, and if they do not consume now, they invest in Treasury bills. The ratio of present to future consumption is given by the real interest rate: the Treasury bills have a nominal return, but the future prices of goods should rise by the expected inflation rate.

If the real interest rate does not matter, then that core mechanism of the model is meaningless. Although it was possible to add epicycles to handle things like the financial system, it is harder to replace core dynamics.

Alternatively, we can ask: what is the value of the mathematisation of economic theory, if we cannot answer a basic question like what level of the policy rate is where it starts to slow inflation and/or growth?

Email subscription: Go to https://bondeconomics.substack.com/ 

(c) Brian Romanchuk 2022
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Peter Schiff: This Bubble Economy Is Going To Burst

Peter Schiff: This Bubble Economy Is Going To Burst

Via SchiffGold.com,

Peter Schiff recently appeared on the Rob Schmidt Show on Newsmax to…

Peter Schiff: This Bubble Economy Is Going To Burst

Via SchiffGold.com,

Peter Schiff recently appeared on the Rob Schmidt Show on Newsmax to talk about the trajectory of the US economy. Peter explains how the Federal Reserve and the US government created a massive bubble, why it is going to ultimately pop, and how to protect your savings and investments when it does.

The First question Rob asked was how is the Federal Reserve going to fix the inflation problem?

Simply put, it’s not. The Fed will make it worse.

Peter said in the first place, the Fed is lying about the extent of the problem. The CPI doesn’t measure the rise in prices accurately.

If we just use the same CPI that we used during the 70s and 80s, and applied the numbers today, we would get about 15 percent inflation for 2021. So, last year was worse than any year of the 1970s, and it was worse than 1980 when CPI was up 13.5 percent. So, this is the worst inflation we’ve ever seen.”

Peter said, unfortunately, it’s going to get even worse.

We have just seen the tip of an inflationary iceberg.”

How did we get into this mess to begin with?

The Fed created the problem.

They’ve been printing all this money. They sent the printing presses into overdrive during the pandemic. But we had an even bigger problem. The government forced people to stop working during the pandemic. So, people weren’t on the job. They weren’t producing goods. They weren’t supplying services. They should have spent less money because they weren’t earning money. The government made the mistake of sending everybody stimulus money so they could go out and spend money to buy products that didn’t even exist because they weren’t created. That’s why we have a supply shortage — because everybody is spending money that the Fed printed, not money that they earned producing goods and providing services. So, it’s a double-whammy. Prices are going ballistic. And this year is going to be worse than last.”

The Fed has said it plans to raise rates, possibly to 2 percent by 2022. Rob said that doesn’t seem substantial. Peter likened it to spitting in the ocean.

Inflation is already 7 percent, even if you accept the government’s numbers, which are a lie. How do you fight 7 percent inflation with 2 percent interest rates? Remember, the Fed had interest rates at 2.5 percent in 2018 when they had no inflation to fight. CPI was only up 1.9 percent in 2018. Yet, the Fed is not going to raise interest rates now to a level they were back then. So, the whole thing is a lie. The truth is if the Fed actually raised interest rates high enough to fight inflation, it would crush the economy. We’d have a worse financial crisis than 2008. The stock market would crash –bond market, real estate market. Government would have to slash spending because interest rates would skyrocket. And so to prevent that from happening, the Fed is going to not fight inflation and that’s why it’s going to get so much worse.”

But the economy seems healthy. That is until you look beneath the surface. We have record trade deficits. The government is running massive budget deficits.

We’re living in a gigantic bubble, and now we’re beginning to see that because prices are really starting to rise and there’s no way to stop them from going up. And this is when everything comes collapsing down. Because eventually, this stagflationary environment that we’re in, which will be much worse than the 1970s – more inflation and a weaker economy – is going to prick that bubble. So, even if the Fed won’t prick it, the markets are going to prick it for them.”

With inflation so pervasive, Peter said anybody who is retired or who wants to retire needs to get out of dollars.

Inflation is going to wipe you out. It is a gigantic tax and it’s going to impoverish an entire generation unless they act quickly to get into real assets. … You have to own real things that can’t be printed because if you just own paper, you’re going to get wiped out.”

Tyler Durden
Wed, 01/19/2022 – 06:30







Author: Tyler Durden

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Temporary reprieve

Equity markets are recovering some of yesterday’s losses but anxiety and uncertainty continue to dominate after a disappointing start to earnings season….

Equity markets are recovering some of yesterday’s losses but anxiety and uncertainty continue to dominate after a disappointing start to earnings season.

Inflation and interest rate concerns are going nowhere soon and with traders now increasingly considering the possibility of hikes larger than 25 basis points, the possibility of more pain in stock markets is very real.

The idea that we could go from rock bottom rates and enormous bond-buying to rapid tapering, 50 basis point hikes, and earlier balance sheet reduction is quite alarming. We’re talking about markets that have become very accustomed to extensive support from central banks and very gentle unwinding when appropriate. This is quite a shock to the system.

And so far earnings season is not providing investors the comfort they were hoping for. Significant compensation increases and lower trading revenues hurt JP Morgan and Goldman Sachs, and higher wage demands are likely to be a common theme throughout the next few weeks which will put a dampener on the bottom line and not alleviate concerns about persistent and widespread price pressures.

UK inflation jumps again ahead of Bailey appearance

The CPI data from the UK this morning compounded inflation concerns, hitting a 30-year high and once again surpassing expectations in the process. And it’s highly unlikely we’re seeing the peak, with that potentially coming around April when the cap on energy tariffs is lifted considerably to reflect higher wholesale prices. Other aspects will also contribute to higher levels of inflation at the start of the second quarter, at which point we may have a better idea of how fast it will then decline.

Of course, the Bank of England can’t just turn a blind eye until then. The MPC may be willing to overlook transitory inflationary pressures but the rise in CPI has proven to be neither temporary nor tolerable. Instead, it’s become more widespread and the central bank is being forced to act and may do so again next month after raising interest rates for the first time since the pandemic in December. A few more hikes after that are also priced in for this year but if pressures continue to mount, traders may begin to speculate about the possibility of larger hikes, as we’ve seen starting in the US.

All of this should make Andrew Bailey’s appearance before the Treasury Select Committee later today all the more interesting. The central bank has warned of higher inflation and possible interest rate hikes for months but delayed doing so after initial hints ahead of the November meeting. Given what’s happened since, the decision looks all the more strange. Of course, it’s easy to say that with 20/20 hindsight.

Consolidation continues

Bitcoin appears to have gotten lost in the noise of the last few weeks. It’s not falling too hard despite risk assets getting pummelled but it’s not recovering to any great extent either. Instead, it’s floating between support at USD 40,000 and resistance around USD 45,000 and showing no signs of breaking either at this point.

For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/

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Author: Craig Erlam

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