Low Mortgage Rates, Slow Growth: Same Old Storyby Tim Manni
There’s little new or emerging news in the world of mortgage rates. As we examine the movement and behavior of the economic markets from the week prior (just as we do every Monday), we’re faced with the same old story: low mortgage rates and a weak recovery. Last week’s unemployment report only served to maintain the current environment of low rates and a tepid recovery.
“Prospects are not improving for a speedy return to quicker growth,” according to HSH.com’s latest Market Trends Newsletter, “but that is serving to keep mortgage rates at fantastic levels.”
Each week for some 30 years, HSH has produced an overall mortgage monitor — our Fixed-Rate Mortgage Indicator (FRMI). The FRMI includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public. After a two-basis point uptick [two weeks ago], the FRMI declined by five basis points (.05%) [last week] to 4.87%. An alternative to a cheap fixed-rate mortgage comes in the form of a Hybrid 5/1 ARM; these solutions for shorter time-frame borrowers can be had at an average rate of just 3.85%.
At this point, I would be willing to bet that most of you would be willing to trade an increase in these historically-low mortgage rates for an improvement in the employment and housing markets. Consumer moods — measured on a weekly basis via the ABC News/Washington Post poll — continue to darken, and fell back again during the week ending August 1, landing at minus-50 for the week, matching its 2010 lows:
What might spark cheer, and promote growth? Jobs, which are hard to find and will remain so for some time yet to come. That said, we (and many others) long ago identified jobs and underwater mortgages as the two most pressing problems in today’s economy. A rumor floated around [last] week that the administration was readying a plan to offer mortgage principal reduction for certain underwater homeowners. That rumor was quickly quashed — “a bailout for main street” was one characterization — but some serious minds need to start considering how to best approach this problem before too much more time passes.
As has been the case for months, mortgage rates are great. If you can get access to the market, it is a great time to buy or refinance. If you’re thinking of buying a home with a small down payment, or if you have a middling credit score, you should know that the FHA announced [last] week forthcoming changes which will affect how much you’ll need to put down and how much your mortgage insurance will cost you. Given the gap in underwriting standards between the GSE-backed market and the FHA-backed one, these are relatively minor tweaks, but tightening nonetheless.
CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Economic Lull.”
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.