My Homeowners Advocate Reviews
15-, 30-year mortgage rates dip in week
WASHINGTON -- Long-term U.S. mortgage rates edged lower this week. As rates remain at historically low levels, homeowners taking advantage of the chance to refinance their mortgages have pushed up refinancing activity.
Mortgage giant Freddie Mac said Thursday that the average for the benchmark 30-year, fixed-rate mortgage declined to 3.44 percent from 3.46 percent last week. The average rate is down from 3.90 percent a year ago, and is close to its all-time low of 3.31 percent in November 2012.
The 15-year fixed mortgage rate eased to 2.76 percent from 2.77 percent.
The share of refinancing in overall mortgage activity increased to 64 percent of total applications in the week ended Sept. 2 from 63.5 percent the previous week, the Mortgage Bankers Association reported Wednesday.
To calculate average mortgage rates, Freddie Mac, the Federal Home Loan Mortgage Corp., surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
To get a proper reading of the mortgage industry, Goodman went back to before the financial crisis to understand what normal would be.
In this case, Goodman compared loans from 2011-Q2 2015 and 2009-2010 to 1999-2003, a period with reasonable lending standards and fairly low default rates.
The following chart shows the data Goodman collected, which illustrates by origination year the rate at which mortgages guaranteed by Fannie Mae have gone six months delinquent.
Click to enlarge
(Source: Fannie Mae and the Urban Institute)
While the 2009–10 vintages are defaulting only marginally less than the 1999–2003 vintages, Goodman explained that the 2011–Q2 2015 vintages with three years of seasoning are hardly defaulting at all.
Some of the improvement is due to a shift in originations toward more pristine borrowers, but it’s not the only explanation. Even when Goodman compared mortgages with the same credit profiles, each group performed better than it has in the past.