Excerpts from HSH Associates newsletter for the week ending May 18, 2007:
Mortgage rates ticked a little higher this week, with the average 30-year fixed-rate mortgage rising by three basis points (.03%) to 6.38%. Hybrid 5/1 ARMs rose by six basis points, finishing the weekly survey at 6.20%. The subprime mortgage market fallout has raised concerns that tighter underwriting standards — and possibly tougher regulation overall — might squeeze certain borrowers, preventing some marginally-creditworthy individuals from getting loans.
It’s clear that fringe borrowers, particularly those without money for a down payment, those with poor credit, or those unwilling to document their financial lives will either need to conform to more mainstream standards or wait to buy a home until they have built the requisite credit profile. That said, tighter lending standards are not an unhealthy thing, and overall, credit still seems to be plentiful for the vast majority of borrowers who want to obtain a mortgage. It seems unlikely that standards will tighten further for ‘prime’ borrowers, but the non-traditional and subprime issues have yet to fully run their course.
As was the case last week, there’s been no single event to push mortgage rates in one direction or another. However, strong stock markets, rising interest rates around the world and currency manipulations by China are exerting some influence, and a little bit of an upward trend has emerged. This week’s 6.38% matches the highest average rate since early February, and as we think rates may add four or five basis points next week, we might be close to challenging the 2007 high (6.45%) before long.
Fixed Rate Variable
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