Mortgage Rates: US Banks Struggling to Cope with Refinance Demand
Banks across the US are sluggishly lowering mortgage rates as more and more reach and surpass their own limitations when it comes to handling the recent rush of refinancings.
The ability of the major US lenders to handle refinancings is something of a key issue of importance for investors of mortgage-backed securities, as the steeper the obstacles for the consumers, the better off the investors will be who would prefer early repayments that may amount to a loss.
J.P. Morgan Chase posted 30 year fixed rate mortgages on Wednesday of 4.875%, which is at least half a percent higher than the current national average reported by Freddie Mac. Posting a rate such as this is basically the bank’s way of saying they are effectively closed for business with regard to the loan rates corresponding to national guidelines.
Even in the event that long-term Treasury rates hit 1.75%, 30 year rates for consumers would likely fall less than 10 basis points, according to Credit Suisse.
That being said, mortgage rates for 30 year terms are still expected to hit the 4% mark given time, while the primary-secondary spread compresses. Investors seem to be expecting this too, buying mostly into loans unlikely to be refinanced because of low rates or government aid.
Related posts: