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A 30-Year Fixed in the 3% Range? Maybe, But Does Anyone Care?


The good news about the continued economic uncertainty is interest rates keep slipping lower and lower.

The basic principle with regard to mortgage rates is that bad economic news pushes them down, and good news makes them rise. Fairly simple.

And so over the past few weeks, mortgage rates have been inching back toward what could be new all-time record lows.

In fact, there’s even talk of the popular 30-year fixed-rate mortgage falling into the 3% range, which is certainly uncharted territory. Hooray! Pop the champagne, right?

Right now you can get your hands on a 30-year fixed in the high 3% range if you pay several mortgage discount points at closing, but clearly not everyone has the money nor wants to buy down their interest rate.

It just doesn’t make sense given all the “uncertainty.” And yes, I only quoted that to emphasize

Still, rates are so low that some fence sitters may be looking to buy real estate again, especially first-time home buyers with no existing home equity concerns.

Current Homeowners Trapped

You see, those who already own a home are kind of trapped – despite mortgage rates marching to new all-time lows, property values are also sinking.

So these people can’t put their home on the market unless they’ve got some serious home equity.

And the only people who do are those who purchased before the housing boom and didn’t elect to take a cash-out refinance or home equity line of credit at any point during the housing run-up.

Unfortunately, this is a select few, so the unprecedented mortgage rates aren’t having their desired effect.

This is evidenced by the lackluster mortgage application and pending home sale figures that continue to be reported each month.

Strange that no one seems to care about mortgage rates this low, isn’t it? But is it a lack of care, or more a lack of confidence in housing and the economy at large?

Housing No Longer the Ultimate Investment

It seems nobody is interested in buying a home, despite being able to actually afford one now, probably because they won’t be able to “flip it” and “make millions” overnight.

That was the draw of purchasing a home during the run-up and subsequent bubble. To get rich. That mentality seems to have vanished, so who cares about low mortgage rates?

Sure, your monthly mortgage payment will be super low and you’ll be able to buy a larger home, but without kick-butt appreciation, what’s the point? Why not just rent?

Perhaps that’s the mentality now – it’s not a sure thing anymore, so why take the risk and go through the trouble?

Interestingly, low mortgage rates can matter a lot more than home prices. I wrote about the two previously.

The scary part though is if prospective home buyers aren’t biting now, who will be once mortgage rates rise?

And what will happen to home prices if rates rise to more sustainable, natural levels? Will they too need to plummet to garner any interest?

Perhaps I’m being overly cynical, but you’d think there would be more excitement about mortgage rates this low.

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