Mortgage rates are down; purchases are up

Mortgage rates have fallen two weeks in a row. The last time that happened was back in September.

The decrease in rates was accompanied by a modest rise in mortgage applications for home purchases. To round out the positive news, the Federal Housing Administration has announced that it will cut the cost of mortgage insurance premiums.

The two-week decline in mortgage rates is welcome news. Mortgage rates went up in 12 of the last 13 weeks of 2016 — and they stayed the same the other week. In the last week of September, the 30-year, fixed-rate mortgage averaged 3.54 percent, and now it’s more than half a percentage point higher.

Mortgage rates this week

The benchmark 30-year fixed-rate mortgage fell this week to 4.20 percent from 4.21 percent, according to Bankrate’s weekly survey of large lenders. A year ago, it was 4.05 percent. Four weeks ago, the rate was 4.18 percent.

The mortgages in this week’s survey had an average total of 0.24 discount and origination points.

Over the past 52 weeks, the 30-year fixed has averaged 3.79 percent. This week’s rate is 0.41 percentage points higher than the 52-week average.

• The benchmark 15-year fixed-rate mortgage fell to 3.41 percent from 3.45 percent.

• The benchmark 5/1 adjustable-rate mortgage rose to 3.52 percent from 3.5 percent.

• The benchmark 30-year fixed-rate jumbo mortgage fell to 4.24 percent from 4.28 percent.

Things are looking up

Purchase mortgage applications were up 6 percent last week compared with the week before, according to the Mortgage Bankers Association. They were down 18 percent from the same week a year before, but lenders and homebuyers seem to be in a mood to put a positive spin on news whenever possible.

With mortgage rates significantly higher than they were just three months ago, “the refinancing market is drying up,” says Brian Koss, executive vice president of Mortgage Network, which lends up and down the East Coast. “We feel really good about the purchase market. Yesterday was a day that was almost on par with what we would see in the middle of the spring (buying) market. It was a good application day all around.”

FHA cuts premium

There was another development this week that could spark even more homebuying: FHA-insured mortgages will cost less, beginning with loans that are closed on or after Jan. 27. For FHA borrowers getting 30-year loans, the annual mortgage insurance premiums will be cut by a quarter of a percentage point.

These annual premiums are paid monthly; someone getting a $200,000 mortgage would save $41.67 a month, or $500 a year.

The FHA reduction was announced during the Obama administration and is set to go into effect during the Trump administration. It’s possible that the Trump administration could rescind the cut in FHA costs. The president-elect and his transition team have not commented on the FHA announcement.

Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, complained that the premium cut was “the Obama administration’s parting gift to hardworking taxpayers.”

Hensarling added in a statement: “Playing politics with the FHA through cynical, surprise 11th-hour rule changes is irresponsible and endangers the integrity and success of the FHA.”