As you’re probably aware, the latest move to boost the economy was another round of quantitative easing, known as QE3.
This most recent initiative targets mortgage-backed securities specifically, with the Fed pledging to purchase $40 billion per month, on an open-ended basis, until things improve.
Since it was announced, mortgage rates have inched down to new all-time lows, not that they were anywhere close to high to begin with.
In other words, I don’t think anyone was pumping the brakes on buying or refinancing because rates were “too high.”
So now homeowners that may have qualified for a rate of 3.5% on a 30-year fixed can snag a rate of 3.25% instead. Pop the champagne!
On a $200,000 loan amount, we’re talking about nearly $30 a month in savings. And ideally this money is pumped back into the economy to get things chugging along again.
But are low rates the problem here, or simply the easiest out for the Fed?
Mortgage Rates No Longer a Popular Search Term
I decided to do a little test to see if the low mortgage rates were making a difference.
Sure, they made a difference over the past few years after dropping several percentage points, but now that they’ve been so low for so long, I wanted to see if pushing them even lower would make a material difference.
So I turned to Google, and more specifically, their Insights for Search tool. It shows you what people are searching for on Google, which can be a pretty powerful gauge of something’s popularity.
For example, if we look at the term, “NFL,” we can see that it’s very seasonal, and also very predictable.
In August, searches for “NFL” jump, and then remain elevated until January when the Superbowl takes place.
Search volume quickly plummets after the season ends, then rises briefly in April during the NFL draft, and remains low throughout summer.
What about the term “mortgage rates?” Well, if we look at the chart, search volume is now about the same as it was back in 2006, when the housing market was reaching its apex.
But it has fallen by nearly 50% compared to numbers seen in August 2011. And volume is only about a quarter of that seen in December 2008.
Since then, it has steadily fallen, aside from a couple blips in August 2010 and August 2011.
In both of the past two summers, mortgage rates fell rather significantly, which explains the boost in search volume.
Mortgage rates for 30-year fixed mortgages also fell from 6.09% in November 2008 to 5.29% in December 2008, per Freddie Mac data, which explains the spike in search volume then.
And even though mortgage rates are now about two percentage points lower than that, search volume is nowhere close to what it once was.
Why Did We Switch Off?
So what gives? Did most people refinance already, or do many people perceive the low rates as “old news?” Or is it that most people are aware of them, but realize they don’t qualify for one reason or another?
Whatever it is, it’s pretty clear that there is a lot less interest than there used to be, despite the housing market showing signs of improvement. If anything, volume should be up with home sales. But that’s not the case.
Could it be fatigue, or is it that it’s just boring at this point? How many straight weeks or record low mortgage rates do we need to hear about it on the local news?
Most people I speak to (outside the mortgage world) don’t seem too interested about the rates. They know they’re low, but don’t really care too much.
Even if they didn’t refinance, they’re usually pretty lax about the whole deal, which makes me wonder if pushing rates lower and lower is the solution here.
Perhaps the Fed should focus on getting the economy kickstarted another way, instead of pushing interest rates to zero.
Read more: Are mortgage rates negotiable?