July 26th, 2010

What’s to Stop Falling Mortgage Rates?



For months now we’ve been saying that rates have to firm up sooner or later. But week after week the headlines of our weekly newsletters stay the same. Last week was no different.

Mortgage rates fell again last week, according to the latest issue of our Market Trends Newsletter, “Great Rates, but Summer Bummer.” The weekly average for the 30-year Conforming rate (week ending July 23) fell to 4.64%, down from 4.69% the week prior.

However, it’s not just the 30-year Conforming rate that’s falling:

HSH’s overall mortgage-rate gauge, our Fixed-Rate Mortgage Indicator (FRMI) includes rates for conforming, jumbo, and the GSE’s “high-limit” conforming products and so includes a broad swath of the mortgage-borrowing public. The FRMI closed the week by falling eight basis points (.08%), landing at 4.90%. If a long-term fixed-rate mortgage isn’t the best option for you, perhaps you might consider a hybrid 5/1 ARM, which finished the week at 3.92%.

With very few signs of a strengthening economic recovery, we ask: what will stop rates from falling even lower?

The summer bummer of weak economic recovery should continue next week. Mortgage rates again stand at new lows, and what’s to stop the downward march? Will appetites for low-yielding mortgage paper continue to develop, even as new risks to home valuations may be forming and economic growth faltering? It’s hard to come up with any sound reasoning why it should, but with stock markets finding a little footing, we might just hold pretty steady next week.

Have you been able to take advantage of these historically-low rates? If you have (even if you haven’t for one reason or another), leave us a comment and let us know — we want to hear all about it.

CLICK HERE to continue reading the latest issue of our Market Trends Newsletter.

HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

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7 Responses to “What’s to Stop Falling Mortgage Rates?”

  1. Steve Nicewarner Says: July 26th, 2010 at 12:07 pm

    To some extent, we might have to come at this from another angle. Perhaps we should be asking “How far do interest rates have to fall before people come back into the housing market?”

  2. Tim Manni Says: July 26th, 2010 at 2:13 pm

    Hey Steve,

    Thanks for commenting. Here’s another question, “to what extent is the housing market’s recovery built around low rates?”

    Thanks again, hope to hear from you again soon,

  3. Steve Nicewarner Says: July 28th, 2010 at 11:55 am


    That is also a good question. Based of how little current rates are affecting the market, I would have to say “not much.” Since the original article was about low interest rates, I tried to frame my question similarly. In that context, what will stop falling interest rates is increased demand for mortgages — a stronger housing market. That sounds like a truism, but it’s basic supply and demand.

    How do we get a stronger housing market? One of two things has to happen;

    1. Buyers need to have some clarity about their relationship to government — both their tax burden and their level of regulation. Without knowing how much disposable income they will have, they can not make rational decisions about a mortgage.

    2. Business needs some clarity about the same thing. If they get this, they will be confident about creating jobs, and employed people tend to take out more mortgages.

    [as an aside, I believe one of these will almost inevitably lead to the other]

  4. Efinity Mortgage Says: July 28th, 2010 at 2:17 pm

    Low rates are great – but a major problem is home valuations. You might qualify for a 4.5% mortgage on a 30 year traditional mortgage, but the home you are trying to purchase might appraise for $50,000 less than the purchase price. This is causing major headaches for some housing markets.

  5. Tim Manni Says: August 1st, 2010 at 6:08 pm

    Hey Steve,

    You make a really, really great point: “Buyers (and businesses) need to have some clarity about their relationship to government.” We have been saying this for some time know. While incentives like the tax credit help spur demand, it brings a skewed vision of the market. Things like HAMP and HARP, while helpful for some, have clouded the true sense of the foreclosure problem in this country.

    Thanks for bringing your voice to our blog, your comments have been great. Thanks,

  6. Cole Simon Says: November 25th, 2010 at 2:24 pm

    Those are interesting questions on mortgages and there rates. My wife and I have been checking out jumbo mortgages. We found one site that listed some good questions I’ve add this site to knol if anyone has any suggestions please make a post it would be helpful before we make the plunge.

  7. Tim Manni Says: November 29th, 2010 at 10:44 am


    Thanks for your comment,

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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