Refi rates follow stock market up

Mortgage refinance rates are following the same path as the stock market. The stock market has rallied sharply following the low point in March. The market is up over 30% during the past sixty days as investors have put more money back into equity positions with a belief that the economy will soon be heading for brighter days.

Mortgage rates are following the same path as the market, with a significantly smaller adjustment. Over the course of the past thirty days the average rate on a thirty year fixed rate mortgage loan has adjusted up by approximately .375 pts. The yield on the ten year bond, which is a leading indicator of where mortgage rates are tracking is up from 2.35% to 3.29% as of Monday.

The majority of economic news over the past two weeks has been received with mixed results from investors who are gleaning for momentum. The market has been able to see past some of the mixed news (job report – cpi) with a belief that the overall health of the U.S. economy will rebound by 2010 as consumer confidence begins to grow. The market seems to be trying to refocus on corporate earnings and has a smaller degree of concern for the day to day rumblings of dire that sent the stock market into a tailspin earlier in the year.  

Mortgage rates are still available near historic low levels and the average rate for a fifteen year fixed rate loan was below five percent. The average rate on a thirty year fixed rate loan is now trending above five percent and closing in on 5.5% with zero points with most national lenders. The upward tick with mortgage rates is not likely to deter new home buyers who are taking advantage of great housing inventories and the government tax rebate. The upward movement could slow down refinance loans with mortgage lenders as consumers debate the return on investment of refinancing their mortgages. Most consumers benefit from a reduced mortgage rate through refinancing, but the recent challenges in the market have resulted in higher fees passed onto consumers. Fannie Mae and Freddie Mac the countries two largest agency lenders (they securitize most mortgage loans) have raised their risked base loan pricing. The net result is most consumers who have good to excellent credit ratings (680-740 fico scores) are required to pay additional points for their mortgage based on variables such as loan to value, primary residence, etc. The additional fees should be taken into consideration when you are determining your breakeven point with your mortgage refinance.