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WASHINGTON (MarketWatch) -- U.S. mortgage generation will decline by 19.5% in 2006, as mortgage rates rise and home sales slow, the Mortgage Bankers Association said Wednesday. MARKETWATCH TOP NEWS U.S. stocks end lower on weak housing data, rate woes Economists at Davos see global growth holding up Google builds censorship into China search service BB&T won't lend to developers in eminent-domain cases White House promises to fix Medicare drug-plan snafus The group predicted total residential mortgage production will drop to $2.24 trillion in 2006 from an estimated $2.79 trillion in 2005. If estimates hold up, however, 2006 would be the fifth highest year on record. "Housing will decline modestly from the fifth consecutive record year in 2005, but will remain robust historically," said Doug Duncan, the group's chief economist. "Home price appreciation rates will moderate compared to recent years," he added in a statement. The group released its latest economic forecast as the National Association of Realtors said existing U.S. home sales fell 5.7% to a seasonally adjusted annual rate of 6.6 million, the lowest in almost two years. Read the story. Duncan said those numbers are "perfectly consistent" the group's forecasts. The bankers' association predicts existing home sales will drop by 4.7% in 2006 and by another 4.4% in 2007. In 2008, sales should remain flat, the group said. Existing home price appreciation, meanwhile, will likely moderate in 2006, with existing home prices rising 6.6%. Median prices of new homes should rise 5% in 2006, the group said. During 2007 and 2008, price gains are on track to rise at about 4% to 5% for both existing and new homes. Duncan emphasized that although the housing market is projected to slow down, activity is still at what he deemed healthy levels. "We've gone up this mountain, record after record, for five consecutive years, but instead of going into a valley we're going to go to a plateau," he told reporters Wednesday.
WASHINGTON, Jan 25 (Reuters) - Lenders this week asked U.S. regulators to extend a comment period on a proposal that urged tighter underwriting on new mortgage products that may pose greater risks for banks and borrowers as interest rates rise. Comments were due Feb. 27, but lenders have asked the Federal Reserve and other regulators for 30 more days. "The proposal is extremely complex and has far-reaching consequences for our members, as well as for the nation's mortgage markets," wrote Janet Frank, director of mortgage finance in America's Community Bankers' government relations office. "We believe that it will take an additional 30 days to complete the necessary evaluation and collect comments and data from our membership," Frank told regulators in a letter. The Consumer Mortgage Coalition and HSBC North America Holdings Inc. (HBC.N: Quote, Profile, Research) also requested an additional 30 days. Spokesmen for the Fed and Office of the Comptroller of the Currency were not immediately available to comment. The Fed, OCC, Federal Deposit Insurance Corp., Office of Thrift Supervision and the National Credit Union Administration in December told mortgage lenders they should take caution with nontraditional home loans that may strain borrowers' finances. The guidance targeted interest-only and payment option adjustable rate mortgages and the practice of pairing exotic loans with second mortgages and allowing reduced documentation for borrowing. It followed a five-year rally in the U.S. housing market that shattered sales and construction records and sent prices up more than 55 percent nationwide. That has led some economists to worry the market has become a bubble set to burst, due in part to loose lending practices and the aggressive use of nontraditional mortgage products. © Reuters 2006. All Rights Reserved.
By Julie Haviv
NEW YORK, Jan 25 (Reuters) - U.S. mortgage applications climbed for the third straight week in January, fueled by a decline in long-term rates to 3-1/2-month lows, an industry trade group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Jan. 20 rose 7.7 percent to 660.5, boosted by renewed demand for home purchase loans and strong refinancing volume. The group's seasonally adjusted index of refinancing applications increased 7.8 percent to 1,773.9 -- its fourth consecutive weekly rise. U.S. housing market observers, however, are wary of last week's uptick in volume and were quick to dismiss the suggestion that it indicated a long-term trend. "I do not think this is indicative of housing being strong, but rather that fact that people are expecting rates to rise and they are taking advantage of that," said Celia Chen, director of housing economics at Moody's Economy.com, a consulting firm. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.04 percent, down 0.03 percentage point from the previous week's 6.07 percent, marking its seventh consecutive weekly decline. Rates were at their lowest level since the week ended Oct. 7, when it reached 5.98 percent. The rates on the 30-year mortgage, the industry benchmark, have been on a downward trend since the week ending Nov. 11, when they reached a 2005 high of 6.33 percent. "During the holiday-shortened week, the MBA may have overcompensated its seasonal adjustment of the data," Chen said. RENEWED PURCHASE LOAN DEMAND The MBA's seasonally adjusted purchase mortgage index rose 6.7 percent to 473.7, erasing a 3 percent slide in the previous week. The index is considered a timely gauge of U.S. home sales. Fixed 15-year mortgage rates averaged 5.66 percent, up from 5.64 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.44 percent from 5.39 percent. Analysts say an increasing number of borrowers are converting their ARMs into new fixed-rate loans as the difference between adjustable and fixed mortgage interest rates narrow. They say this has been a factor in refinancing demand. The ARM share of activity fell to 29.5 percent of total applications from 30.6 percent the previous week. ARM demand reached a 2005 high of 36.6 percent in late March. Refinancings also decreased as a percentage of all mortgage applications, falling to 42.8 percent from 44.0 percent, the MBA said. HOUSING COOLING OFF The MBA's robust report preceded separate data showing weakness in the U.S. housing sector. Sales of existing U.S. homes dropped 5.7 percent in December to a rate of 6.6 million units, marking the third consecutive decline and hitting the lowest level since March 2004, according to data from the National Association of Realtors on Wednesday that pointed to further slowing in housing. Mortgage lenders, however, are optimistic about the sector's outlook. "Long-term rates have been on a steady decline since November, which will have a stimulative effect on housing in the coming months," said Bob Walters, chief economist at Quicken Loans, an online mortgage lender. "This year probably won't beat 2005's record year," but he added that as long as the U.S. unemployment rate stays steady and interest rates remain within the current range, then he believes that "housing will remain robust." The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts. (Additional Reporting by Kristin Roberts)
WASHINGTON, Jan 25 (Reuters) - Lenders this week asked U.S. regulators to extend a comment period on a proposal that urged tighter underwriting on new mortgage products that may pose greater risks for banks and borrowers as interest rates rise. Comments were due Feb. 27, but lenders have asked the Federal Reserve and other regulators for 30 more days. "The proposal is extremely complex and has far-reaching consequences for our members, as well as for the nation's mortgage markets," wrote Janet Frank, director of mortgage finance in America's Community Bankers' government relations office. "We believe that it will take an additional 30 days to complete the necessary evaluation and collect comments and data from our membership," Frank told regulators in a letter. The Consumer Mortgage Coalition and HSBC North America Holdings Inc. (HBC.N: Quote, Profile, Research) also requested an additional 30 days. Spokesmen for the Fed and Office of the Comptroller of the Currency were not immediately available to comment. The Fed, OCC, Federal Deposit Insurance Corp., Office of Thrift Supervision and the National Credit Union Administration in December told mortgage lenders they should take caution with nontraditional home loans that may strain borrowers' finances. The guidance targeted interest-only and payment option adjustable rate mortgages and the practice of pairing exotic loans with second mortgages and allowing reduced documentation for borrowing. It followed a five-year rally in the U.S. housing market that shattered sales and construction records and sent prices up more than 55 percent nationwide. That has led some economists to worry the market has become a bubble set to burst, due in part to loose lending practices and the aggressive use of nontraditional mortgage products.
© Reuters 2006. All Rights Reserved.
Clare Francis, Jan 30 (TimesOnline) - Easy ways to pay off your mortgage early Making overpayments of as little as $3 a day will make a big difference to the length of your loan HOW do you fancy saving $22,000 in mortgage interest and paying your home loan off three-and-a-half years early? Sounds like a pipe dream? Well, it needn’t be. Someone with a 25-year, $180,000 repayment mortgage could achieve this by overpaying on their loan by just $3 a day, according to Abbey. This assumes the borrower has the bank’s Flexible Plus mortgage, a lifetime tracker offset loan. The current interest rate is 5%. Offset mortgages work by setting your savings against your borrowings. Your savings, and in some instances current- account money, are linked to your mortgage and instead of earning interest on your savings you reduce the interest you pay on your debts. If you had a $100,000 mortgage and $30,000 savings you would pay interest on only $70,000 of the loan. However, your monthly payments would be unchanged because they would still be based on the full $100,000. You would therefore be overpaying every month so you would clear your mortgage more quickly. Offset mortgages are fully flexible. Borrowers can overpay, underpay or take payment holidays. But as many standard mortgage deals offer degrees of flexibility, do you really need an offset? Melanie Bien at Savills Private Finance, a broker, said: “An increasing number of borrowers are looking for flexible options. Short-term contracts, bonuses and self-employment mean fluctuating incomes and these are better suited to mortgages with flexible features, such as the ability to overpay or underpay and take payment holidays. But you tend to pay for flexibility, so it is important to ensure that any deal you choose has features that you are actually going to use.” The price difference between offset and ordinary mortgages is narrowing, but they are still more expensive than the most competitive standard deals. For example, Yorkshire has the lowest five-year, fixed-rate offset at 4.84%. But you can fix for five years with Newcastle building society at 4.54% and overpay up to $500 a month. Many lenders also allow borrowers to take a payment holiday on their standard loans, although restrictions often apply. You will probably be allowed to miss payments only if you have previously overpaid. There may also be restrictions on the number of payment holidays you can take. Nationwide, for example, lets you miss only two consecutive payments. Ray Boulger at John Charcol, a broker, said: “If you simply want to make overpayments, there is no need to go for an offset. If you want the ability to overpay and take payment holidays, there is also a wide choice of standard mortgages. But if you want to overpay, take payment holidays and be able to draw money back down, you will need a fully flexible mortgage or an offset deal.” Fully flexible loans offer the same features as offsets, but without a linked savings or current account. Therefore, if you want your savings to work to reduce the interest you pay on your mortgage, you will have to make an overpayment into your mortgage account. You can pull the money back out again if you need it, but this involves putting in a request to the lender and it may take a few days before you get your cash. If you want to retain easy access to your savings, a flexible loan may not be the best option. Also, not all flexible deals are the same. David Hollingworth at L&C Mortgages said: “Some lenders, such as Standard Life Bank and Woolwich, have a facility to set up a pre-agreed reserve limit that can be drawn down at a future date, while others allow drawdown only from earlier overpayments.” Say you need a $100,000 mortgage, but can afford to borrow $150,000: you could set up a pre-arranged credit limit that would allow you to draw the extra $50,000 in the future. However, if you did this you would probably be charged higher interest on the extra. Woolwich charges its standard variable rate, 6.59%, if you draw down money from one of its flexible Openplan mortgages — the pay rate on its two-year, fixed-rate Openplan loan is just 4.69%. Woolwich does offer a range of offsets as well, on which you are not charged a higher rate for drawdowns. Simon Tyler at Chase de Vere Mortgage Management, a broker, said: “If you are going to be putting money in and taking it out on a regular basis, then offsetting is the best option because any savings you have with an offset mortgage are kept in a separate easy-access account. Offsets can be useful for people who want to save lump sums for school fees or tax bills, and for buy-to-let investors.” Some offset providers such as Intelligent Finance, Woolwich, Norwich & Peterborough building society and The One Account also let you link your current account and mortgage. The One Account is slightly different because rather than having separate pots for your savings, current account and mortgage, everything is lumped into one. So when you look at your balance it is like looking at a very big overdraft, which is why it is called a current-account mortgage rather than an offset. As well as helping to reduce the amount of interest you pay on your mortgage, offsetting also has tax advantages, particularly for higher-rate taxpayers. Because you are not earning interest on your savings, you do not have to pay tax on them. Therefore, if you have cash to spare each month, but would prefer keeping it somewhere that is easily accessible, rather than putting it into your mortgage, an offset loan could be ideal. If, on the other hand, you do not think you will need to access the money, a standard mortgage that allows overpayments will be all you need.
Mortgage Refinance News Archives:
WASHINGTON (MarketWatch) -- U.S. mortgage generation will decline by 19.5% in 2006, as mortgage rates rise and home sales slow, the Mortgage Bankers Association said Wednesday. MARKETWATCH TOP NEWS U.S. stocks end lower on weak housing data, rate woes Economists at Davos see global growth holding up Google builds censorship into China search service BB&T won't lend to developers in eminent-domain cases White House promises to fix Medicare drug-plan snafus The group predicted total residential mortgage production will drop to $2.24 trillion in 2006 from an estimated $2.79 trillion in 2005. If estimates hold up, however, 2006 would be the fifth highest year on record. "Housing will decline modestly from the fifth consecutive record year in 2005, but will remain robust historically," said Doug Duncan, the group's chief economist. "Home price appreciation rates will moderate compared to recent years," he added in a statement. The group released its latest economic forecast as the National Association of Realtors said existing U.S. home sales fell 5.7% to a seasonally adjusted annual rate of 6.6 million, the lowest in almost two years. Read the story. Duncan said those numbers are "perfectly consistent" the group's forecasts. The bankers' association predicts existing home sales will drop by 4.7% in 2006 and by another 4.4% in 2007. In 2008, sales should remain flat, the group said. Existing home price appreciation, meanwhile, will likely moderate in 2006, with existing home prices rising 6.6%. Median prices of new homes should rise 5% in 2006, the group said. During 2007 and 2008, price gains are on track to rise at about 4% to 5% for both existing and new homes. Duncan emphasized that although the housing market is projected to slow down, activity is still at what he deemed healthy levels. "We've gone up this mountain, record after record, for five consecutive years, but instead of going into a valley we're going to go to a plateau," he told reporters Wednesday.
WASHINGTON, Jan 25 (Reuters) - Lenders this week asked U.S. regulators to extend a comment period on a proposal that urged tighter underwriting on new mortgage products that may pose greater risks for banks and borrowers as interest rates rise. Comments were due Feb. 27, but lenders have asked the Federal Reserve and other regulators for 30 more days. "The proposal is extremely complex and has far-reaching consequences for our members, as well as for the nation's mortgage markets," wrote Janet Frank, director of mortgage finance in America's Community Bankers' government relations office. "We believe that it will take an additional 30 days to complete the necessary evaluation and collect comments and data from our membership," Frank told regulators in a letter. The Consumer Mortgage Coalition and HSBC North America Holdings Inc. (HBC.N: Quote, Profile, Research) also requested an additional 30 days. Spokesmen for the Fed and Office of the Comptroller of the Currency were not immediately available to comment. The Fed, OCC, Federal Deposit Insurance Corp., Office of Thrift Supervision and the National Credit Union Administration in December told mortgage lenders they should take caution with nontraditional home loans that may strain borrowers' finances. The guidance targeted interest-only and payment option adjustable rate mortgages and the practice of pairing exotic loans with second mortgages and allowing reduced documentation for borrowing. It followed a five-year rally in the U.S. housing market that shattered sales and construction records and sent prices up more than 55 percent nationwide. That has led some economists to worry the market has become a bubble set to burst, due in part to loose lending practices and the aggressive use of nontraditional mortgage products. © Reuters 2006. All Rights Reserved.
By Julie Haviv
NEW YORK, Jan 25 (Reuters) - U.S. mortgage applications climbed for the third straight week in January, fueled by a decline in long-term rates to 3-1/2-month lows, an industry trade group said on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity for the week ended Jan. 20 rose 7.7 percent to 660.5, boosted by renewed demand for home purchase loans and strong refinancing volume. The group's seasonally adjusted index of refinancing applications increased 7.8 percent to 1,773.9 -- its fourth consecutive weekly rise. U.S. housing market observers, however, are wary of last week's uptick in volume and were quick to dismiss the suggestion that it indicated a long-term trend. "I do not think this is indicative of housing being strong, but rather that fact that people are expecting rates to rise and they are taking advantage of that," said Celia Chen, director of housing economics at Moody's Economy.com, a consulting firm. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.04 percent, down 0.03 percentage point from the previous week's 6.07 percent, marking its seventh consecutive weekly decline. Rates were at their lowest level since the week ended Oct. 7, when it reached 5.98 percent. The rates on the 30-year mortgage, the industry benchmark, have been on a downward trend since the week ending Nov. 11, when they reached a 2005 high of 6.33 percent. "During the holiday-shortened week, the MBA may have overcompensated its seasonal adjustment of the data," Chen said. RENEWED PURCHASE LOAN DEMAND The MBA's seasonally adjusted purchase mortgage index rose 6.7 percent to 473.7, erasing a 3 percent slide in the previous week. The index is considered a timely gauge of U.S. home sales. Fixed 15-year mortgage rates averaged 5.66 percent, up from 5.64 percent the previous week. Rates on one-year adjustable-rate mortgages (ARMs) increased to 5.44 percent from 5.39 percent. Analysts say an increasing number of borrowers are converting their ARMs into new fixed-rate loans as the difference between adjustable and fixed mortgage interest rates narrow. They say this has been a factor in refinancing demand. The ARM share of activity fell to 29.5 percent of total applications from 30.6 percent the previous week. ARM demand reached a 2005 high of 36.6 percent in late March. Refinancings also decreased as a percentage of all mortgage applications, falling to 42.8 percent from 44.0 percent, the MBA said. HOUSING COOLING OFF The MBA's robust report preceded separate data showing weakness in the U.S. housing sector. Sales of existing U.S. homes dropped 5.7 percent in December to a rate of 6.6 million units, marking the third consecutive decline and hitting the lowest level since March 2004, according to data from the National Association of Realtors on Wednesday that pointed to further slowing in housing. Mortgage lenders, however, are optimistic about the sector's outlook. "Long-term rates have been on a steady decline since November, which will have a stimulative effect on housing in the coming months," said Bob Walters, chief economist at Quicken Loans, an online mortgage lender. "This year probably won't beat 2005's record year," but he added that as long as the U.S. unemployment rate stays steady and interest rates remain within the current range, then he believes that "housing will remain robust." The MBA's survey covers about 50 percent of all U.S. retail residential mortgage originations. Respondents include mortgage bankers, commercial banks and thrifts. (Additional Reporting by Kristin Roberts)
WASHINGTON, Jan 25 (Reuters) - Lenders this week asked U.S. regulators to extend a comment period on a proposal that urged tighter underwriting on new mortgage products that may pose greater risks for banks and borrowers as interest rates rise. Comments were due Feb. 27, but lenders have asked the Federal Reserve and other regulators for 30 more days. "The proposal is extremely complex and has far-reaching consequences for our members, as well as for the nation's mortgage markets," wrote Janet Frank, director of mortgage finance in America's Community Bankers' government relations office. "We believe that it will take an additional 30 days to complete the necessary evaluation and collect comments and data from our membership," Frank told regulators in a letter. The Consumer Mortgage Coalition and HSBC North America Holdings Inc. (HBC.N: Quote, Profile, Research) also requested an additional 30 days. Spokesmen for the Fed and Office of the Comptroller of the Currency were not immediately available to comment. The Fed, OCC, Federal Deposit Insurance Corp., Office of Thrift Supervision and the National Credit Union Administration in December told mortgage lenders they should take caution with nontraditional home loans that may strain borrowers' finances. The guidance targeted interest-only and payment option adjustable rate mortgages and the practice of pairing exotic loans with second mortgages and allowing reduced documentation for borrowing. It followed a five-year rally in the U.S. housing market that shattered sales and construction records and sent prices up more than 55 percent nationwide. That has led some economists to worry the market has become a bubble set to burst, due in part to loose lending practices and the aggressive use of nontraditional mortgage products.
© Reuters 2006. All Rights Reserved.
Clare Francis, Jan 30 (TimesOnline) - Easy ways to pay off your mortgage early Making overpayments of as little as $3 a day will make a big difference to the length of your loan HOW do you fancy saving $22,000 in mortgage interest and paying your home loan off three-and-a-half years early? Sounds like a pipe dream? Well, it needn’t be. Someone with a 25-year, $180,000 repayment mortgage could achieve this by overpaying on their loan by just $3 a day, according to Abbey. This assumes the borrower has the bank’s Flexible Plus mortgage, a lifetime tracker offset loan. The current interest rate is 5%. Offset mortgages work by setting your savings against your borrowings. Your savings, and in some instances current- account money, are linked to your mortgage and instead of earning interest on your savings you reduce the interest you pay on your debts. If you had a $100,000 mortgage and $30,000 savings you would pay interest on only $70,000 of the loan. However, your monthly payments would be unchanged because they would still be based on the full $100,000. You would therefore be overpaying every month so you would clear your mortgage more quickly. Offset mortgages are fully flexible. Borrowers can overpay, underpay or take payment holidays. But as many standard mortgage deals offer degrees of flexibility, do you really need an offset? Melanie Bien at Savills Private Finance, a broker, said: “An increasing number of borrowers are looking for flexible options. Short-term contracts, bonuses and self-employment mean fluctuating incomes and these are better suited to mortgages with flexible features, such as the ability to overpay or underpay and take payment holidays. But you tend to pay for flexibility, so it is important to ensure that any deal you choose has features that you are actually going to use.” The price difference between offset and ordinary mortgages is narrowing, but they are still more expensive than the most competitive standard deals. For example, Yorkshire has the lowest five-year, fixed-rate offset at 4.84%. But you can fix for five years with Newcastle building society at 4.54% and overpay up to $500 a month. Many lenders also allow borrowers to take a payment holiday on their standard loans, although restrictions often apply. You will probably be allowed to miss payments only if you have previously overpaid. There may also be restrictions on the number of payment holidays you can take. Nationwide, for example, lets you miss only two consecutive payments. Ray Boulger at John Charcol, a broker, said: “If you simply want to make overpayments, there is no need to go for an offset. If you want the ability to overpay and take payment holidays, there is also a wide choice of standard mortgages. But if you want to overpay, take payment holidays and be able to draw money back down, you will need a fully flexible mortgage or an offset deal.” Fully flexible loans offer the same features as offsets, but without a linked savings or current account. Therefore, if you want your savings to work to reduce the interest you pay on your mortgage, you will have to make an overpayment into your mortgage account. You can pull the money back out again if you need it, but this involves putting in a request to the lender and it may take a few days before you get your cash. If you want to retain easy access to your savings, a flexible loan may not be the best option. Also, not all flexible deals are the same. David Hollingworth at L&C Mortgages said: “Some lenders, such as Standard Life Bank and Woolwich, have a facility to set up a pre-agreed reserve limit that can be drawn down at a future date, while others allow drawdown only from earlier overpayments.” Say you need a $100,000 mortgage, but can afford to borrow $150,000: you could set up a pre-arranged credit limit that would allow you to draw the extra $50,000 in the future. However, if you did this you would probably be charged higher interest on the extra. Woolwich charges its standard variable rate, 6.59%, if you draw down money from one of its flexible Openplan mortgages — the pay rate on its two-year, fixed-rate Openplan loan is just 4.69%. Woolwich does offer a range of offsets as well, on which you are not charged a higher rate for drawdowns. Simon Tyler at Chase de Vere Mortgage Management, a broker, said: “If you are going to be putting money in and taking it out on a regular basis, then offsetting is the best option because any savings you have with an offset mortgage are kept in a separate easy-access account. Offsets can be useful for people who want to save lump sums for school fees or tax bills, and for buy-to-let investors.” Some offset providers such as Intelligent Finance, Woolwich, Norwich & Peterborough building society and The One Account also let you link your current account and mortgage. The One Account is slightly different because rather than having separate pots for your savings, current account and mortgage, everything is lumped into one. So when you look at your balance it is like looking at a very big overdraft, which is why it is called a current-account mortgage rather than an offset. As well as helping to reduce the amount of interest you pay on your mortgage, offsetting also has tax advantages, particularly for higher-rate taxpayers. Because you are not earning interest on your savings, you do not have to pay tax on them. Therefore, if you have cash to spare each month, but would prefer keeping it somewhere that is easily accessible, rather than putting it into your mortgage, an offset loan could be ideal. If, on the other hand, you do not think you will need to access the money, a standard mortgage that allows overpayments will be all you need.