Are Mortgage Rates Going to Stay Low?

January 12, 2012 No Comments »
Are Mortgage Rates Going to Stay Low?

Well, it happened again. Mortgage rates crept down to yet another record low. It’s getting old at this point. To be honest, I’m sick of even talking about.

Another week, another record. But it still doesn’t seem to be having much of a positive effect on the housing market.

Per the latest weekly MBA mortgage applications report, purchase money mortgage apps continue to be really weak, accounting for just about 20 percent of the market.

Meanwhile, refinancing continues to hold the lion’s share, though volume doesn’t seem to be improving all that much.

This week, mortgage rates on the 30-year fixed averaged 3.89 percent, down from 3.91 percent last week and 4.71 percent a year ago, per Freddie Mac data.

A while back, I argued that interest rates on the popular loan program wouldn’t fall much lower, and would likely hover around the 4% mark. I’ve been right so far, and I don’t expect that to change.

Sure, the 30-year has dipped lower than where it was when I first made my prediction, but if you notice the recent movement, it’s been pretty minimal. After all, it only fell two basis points this week.

For most borrowers, that won’t mean anything in the way of a lower mortgage payment.

How Long Will the Low Mortgage Rates Last?

So we know mortgage rates are super low, but how long will mortgage rates stay this low?

Well, they’ve been low for a while now because of all the economic turmoil. As I always say, bad news leads to low mortgage rates, and vice versa.

And we’ve certainly had plenty of bad news. That, coupled with the fact that the Fed continues to buy mortgage securities means interest rates will be low for a while.

The latest outright prediction on the direction of mortgage rates also came from Freddie Mac. The company noted back in December that mortgage rates would remain “very low” through at least mid-2012.

And guess what? The predictions keep getting lower for longer. Everyone expected mortgage rates to shoot back up at the end of last year, but now they’re forecast to rise in late 2012.

But the way things are going, it’s hard to imagine them jumping up in a hurry barring any crazy good news.

Perhaps the mega refinance program in the works could eventually disrupt the market and push rates higher, but who knows if that will even materialize?

When Will Housing Recover?

Just like home price predictions, the housing recovery keeps getting pushed back. And with it will be a rise in mortgage rates. So it’s pretty safe to say that mortgage rates probably won’t rise any time soon by any significant amount.

They may ebb and flow, but until we see some meaningful economic improvement, there’s no reason rates should rise.

At the same time, there’s no reason they should fall much lower either, so if you want to refinance, go ahead and do it.

And if you want to purchase a home, it’s not a bad time with regard to rates. Remember, timing the absolute bottom of the market is like playing the lottery.

Read more: Home prices vs. mortgage rates.

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