Mortgage Loan Refinance Guru

Mortgage shoppers continue to play tug-of-war between consistently-low mortgage rates and tight credit conditions:

[Last] week, the overall average for 30-year fixed-rate mortgages tracked by HSH.com’s FRMI was unchanged from [the week prior] at 5.42%. The FRMI includes conforming, jumbo and the GSE’s “high-limit” conforming products in its calculation. It also has a Hybrid 5/1 ARM counterpart, which increased by one basis points during the latest survey cycle, landing at 4.60% for the week.

The latest Senior Loan Officer survey of lending conditions, released [last] week, revealed some fair signals that the tightening of credit conditions were starting to come to an end. For the first time since the downturn began, a net percentage of banks eased borrowing terms for Commercial and Industrial loan clients, suggesting that market conditions for these kinds of borrowers has improved considerably. Four quarters ago, over 64% of banks were still tightening, so this is a fairly rapid – and welcome – improvement.

That’s not quite the case for mortgage borrowers, at least just yet. Conditions are still tightening, according to the survey, but the 13.2% of respondents reporting tougher terms was the smallest such increase since the third quarter of 2007. Since underwriting conditions need to stop getting tighter before they can be loosened, this is a good sign that in the not-too-distant future more potential homebuyers will be able to (re)join the marketplace, at least at the margins. With plenty of unsold inventory available and lots more expected to hit the markets in 2010 in the form of short sales and foreclosures, the market will need every potential borrower it can get just to produce stability in housing markets.

Mortgage rates appear to be holding at what seems to be their new bottoms. Even difficult stock markets at times [last] week failed to produce lower rates, and with a sort of “floor” in place, there seems to be little room for improvement. That being the case, rates have more likelihood of rising slightly than falling next week.

It’s never too late to look ahead. If you’ve got a couple of minutes, you should check out our 2010 Outlook for Mortgage Markets and Rates. It covers what we think are the ten most important considerations for the market next year.

Click here to continue reading “Mortgage Rates Stable, Borrowing Conditions ‘Improving’.” HSH’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.