MaryAdamsMortgage Analysis March 6th, 2014


Crimea doesn't pay; mortgages hardly drop

By Polyana da Costa •

Mortgage rates remained more or less stable this week as fears over the crisis in Ukraine eased and markets rebounded. But this quiet trend could change when the next employment report comes out this week, or at the next Fed meeting.

The rates

  • The benchmark 30-year fixed-rate mortgage fell to 4.45% from 4.48% percent the previous week, according to the national survey of large lenders. One year ago, that rate stood at 3.73%. Four weeks ago, it was 4.43%. The mortgages in this week's survey had an average total of 0.36 discount and origination points.
  • The benchmark 15-year fixed-rate mortgage fell to 3.46% from 3.5% last week.
  • The benchmark 5/1 adjustable-rate mortgage fell to 3.26% from 3.3%.
  • The benchmark 30-year fixed-rate jumbo fell to 4.49% from 4.51%.


Ukraine and rates in the States

Rates had started falling earlier this week as the stock and global markets grew concerned about the threat of a potential military confrontation between Ukraine and Russia. But as tensions eased and the markets returned to normal, rates reversed course a bit, says Bill Banfield, a vice president for Quicken Loans.

While rates have stayed favorable to borrowers for the past month or so, borrowers shouldn't get complacent and think the low rates will last forever.

"They change quickly," he says. "I don't think anyone expected the Ukraine issue to pop up."

Keep an eye on the jobs report

The February employment report that the Labor Department releases this Friday could move rates one way or another.

"This is the biggest economic report of the month," Banfield says.

Economists are forecasting weak job growth for February. If the report meets those expectations, rates may not move much, says Derek Egeberg, a branch manager at Academy Mortgage in Yuma, Ariz.

"But if it's a strong number, rates will go up," he warns borrowers.

The Fed still has power over rates

After the jobs report, the next potential threat to rates is the Federal Open Market Committee meeting that ends on March 19, says Brett Sinnott, Director of Secondary Marketing for CMG Mortgage Group in San Ramon, Calif.

"It will be interesting to see if the Fed will continue to taper," he says. The Fed started cutting back on its bond-purchasing stimulus program in December, when it announced plans to trim the program at every meeting. So far, the Fed has kept its promise.

Regardless of what the Fed decides at its next meeting, rates will likely be affected. But it's hard to tell which way they will go, Sinnott says.

If the Fed suspends tapering, "you could see some panic because that would be a warning sign about the economy," he says. "I think you would definitely see movement (in rates) either way."

What's a borrower to do?

Buyers who have been sitting on the sidelines and potential borrowers who are wondering if they should lock a rate: Get moving, Egeberg says.

"We've already passed the lows, but you still have an amazing opportunity," he adds.

Should you pick a fixed or adjustable rate?

Since rates rose from their record lows last year, an increasing number of borrowers have considered getting an adjustable-rate mortgage loan, or ARM, to keep their payments down, Sinnott says.

"We've seen an increased demand for five- and seven-year ARMs," he says.

These are loans that have a fixed rate for the first five or seven years, and then the rate resets annually. About 8 percent of the mortgage applications last week came from borrowers seeking ARM loans, according to the Mortgage Bankers Association weekly survey.

ARM loans can be ideal for buyers who know they will not keep the house for more than five or seven years, Sinnott says. Otherwise, the 30-year or 15-year fixed mortgage is the safest option, especially with rates being this low, he adds.

Polyana da Costa covers mortgages and housing topics for She has been interviewed as a real estate expert by various news outlets, including ABC News Radio, CBS Radio and local NBC affiliates. She also has been cited by and quoted by U.S. News & World Report, the Fiscal Times and among others. Connect with Polyana da Costa on Google+.                 's corrections policy                         Updated: March 6, 2014