Mortgage Rates Dip to All-Time Lows

Average 30-year fixed mortgage rates have remained below 4.00% (APR: 3.875%) for 6 weeks now according to Freddie Mac’s Primary Mortgage Market Survey released today.  When you view the current level of mortgage rates from a historical perspective it becomes clear what an incredible opportunity this presents (see chart below which depicts average 30-year fixed mortgage rates over the past 41 years).

Even with rates at all-time low levels I still get asked by customers if they should hold-off and wait for rates to move even lower.  It’s extremely hard to imagine that mortgage rates will improve significantly from these levels but not many in our industry thought they would ever get this low in the first place and yet….here we are.

So what factors will play a role in determining the direction of rates over the next few weeks and months?  The European Debt Crisis and our own economic recovery are the two main drivers that we’ll be watching.

The European Debt Crisis, which has been around for nearly two years at various levels of intensity, impacts mortgage rates because when investors around the globe lose confidence in the Euro-zone’s ability to repay its obligations they seek “safety” in US-dollar denominated assets, including mortgage-backed bonds (MBS’s).  The additional demand for MBS’s causes mortgage rates to improve.  Should investors grow optimistic about the EU’s ability to dig themselves out of their fiscal hole without too much collateral damage to the economy then mortgage rates here in the US will likely increase and vice versa.

Meanwhile, a sluggish economic recovery here in the US  has also helped mortgage rates remain low.  This is because interest rates are sensitive to inflationary pressure.  When lenders expect prices to climb in the future they charge higher rates of interest to compensate for the anticipated decline in purchasing power.  Until our economy shows convincing signs of continual growth inflationary pressure should remain tepid which should help mortgage rates remain low.  However, at some point the economy will pick up again and at that time we expect inflation and therefore mortgage rates to tick up as well.

Accurately predicting the future of mortgage rates is like predicting the future value of the stock market.  Some one’s predictions will prove true but the problem is that we don’t who until after we arrived in the future.

Regardless, the current rate climate provides a tremendous opportunity for existing homeowners to take a look at their debts and see if a refinance wouldn’t make sense AND is helping to increase the affordability of housing across the country.

Believe it or not there are still many people who have yet to take advantage of these all-time low mortgage rates.  Please contact me today if you would like a no obligation review of your personal situation.  Furthermore, please mention this post to a co-worker, friend, or family member who you think would benefit.  Thanks!