Mortgage Rates Set New Record Lowby Tim Manni
Mortgage rates have set a new record low.
Last week, mortgage rates managed to tick even lower — albeit not by much — than the record-setting figured we recorded back on December 04, 2009. This time around, the record low was brought on not by federal intervention or a bleak economic picture, but by the continued fiscal struggles overseas:
The 4.90% seen for the [30-year Conforming fixed rate] was down by three basis points (.03%) from [the week ending 5/21/10], and two basis points better than our previous recorded low on December 4, 2009.
HSH’s market-spanning Fixed-Rate Mortgage Indicator (FRMI) eased by another three basis points to complete HSH’s weekly survey at 5.18%. The FRMI includes rates for conforming, jumbo, and the GSE’s “high-limit” conforming products in its calculation, and so covers a wider audience than other surveys. The overall average for the 5/1 Hybrid ARM — presently the most popular alternative to the traditional fixed-rate mortgage — came in at an average interest rate of 4.26%.
Although records are spotty, HSH reckons these rates to be approximately 50-year lows. HSH surveys run back to 1979, and Freddie Mac’s back to 1971, with scant earlier data available from legacy sources such as the Federal Housing Finance Board (now FHFA), the Federal Reserve, and Housing and Urban Development (HUD). Although the mortgage market back in the early 1960s is not directly comparable to today, the interest rates certainly appear to be. Regardless of the length of the comparison period, there is no doubt that these interest rates are excellent. Tempering that good new, however, is the fact that rigid underwriting standards — and a lot of underwater homeowners — means that there are limited numbers of borrowers who can take advantage of them.
Greece’s financial struggles are spreading, sending even more investors in search of “less-risky” investments:
Mortgage rates have recently been driven down to these new lows by a flight-to-quality buy of less-risky assets, or at least those denominated in a more durable currency. Adding to the concern about Greece’s finances came a downgrade of debt offered by Spain, sending the market into yet another tailspin [last] week. Despite this new challenge, underlying interest rates actually moved off their recent lows during [last] week. Without their considerable downward pull it would seem unlikely that mortgage interest rates will continue their decline as we come off of the Memorial Day holiday.
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