Happy Holidays: Your Gift is Record Low Mortgage Rates

December 22, 2011 1 Comment »
Happy Holidays: Your Gift is Record Low Mortgage Rates

You guessed it. Just in time for the holidays, mortgage rates fell to yet a new record low.

Average interest rates on the popular 30-year fixed-rate mortgage slipped to 3.91% during the week ending December 22, down from 3.94% a week earlier, per Freddie Mac data released today.

The loan program had hit a record low a week earlier as well, though it hasn’t displayed much movement for about six months. It has basically hovered around its current level for months now.

In fact, you’d have to go all the way back to July to see any significant movement. Back then it averaged a still absurdly low 4.55%.

However, rates are now nearly a point below the 4.81% average seen a year ago, meaning all those who refinanced recently may have to take another look at their mortgage.

Obviously, this is good news for the mortgage industry, as loan origination volume should receive yet another boost. But it’s a pain for borrowers who have to continually go through the process of refinancing. Or determine when that “right time” is.

Of course, the reward for all that hard work is lower and lower mortgage payments, and greater affordability for those who choose to own homes.

Meanwhile, interest rates on the 15-year fixed held firm at their current record low of 3.21% and are about a point below year-ago levels when they averaged 4.15%.

(30-year fixed vs. 15-year fixed)

Interest rates on adjustable-rate mortgages didn’t display much movement week to week. The 5/1 ARM dipped to 2.85% from 2.86%, and the one-year ARM slipped to 2.77% from 2.81%.

Both are significantly lower than they were a year ago, at 3.75% and 3.40%, respectively.

Mortgage Rates Are Low When the Economy is Bad

So we know mortgage rates keep dipping lower, and while it’s good news for those who own homes, in the sense that they can borrow more for less, it’s not good news for the economy as a whole.

When interest rates are low, it’s a signal that not all is well in the economy. Of course, you don’t need to know where interest rates are at to recognize that these days.

It’s pretty clear that the economy is in the dumps, and it’d be hard to imagine things turning around very quickly.

In other words, even though mortgage financing is historically cheaper than it has ever been, it’s not necessarily the greatest time to buy a home.

The forecasts are still grim, and home prices may continue to fall for the foreseeable future.

(Home prices vs. mortgage rates)

There’s plenty of uncertainty in the air, and so it’s difficult to determine if buying now is a bargain or if you’ll simply be catching a falling knife.

Again, if you buy and hold for the long run, it doesn’t seem like a terrible time to buy real estate. After all, the many millions of existing homeowners are in worse (home equity) positions than you, so you’ll have a pretty good head start. And a super low interest rate to boot!

The big question is how long it’ll take for things to turn around? Something to ponder…

Happy Holidays!

One Comment

  1. Wojo January 6, 2012 at 5:34 am -

    We’re looking to buy a home this year and are dealing with some of the same issues you mention–we’re eager to take advantage of the crazy interest rates, but prices don’t seem to have stabilized in the market yet.

    It will be at least another 6 months before we’re ready to buy, so we continue to sit and watch…

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