September 27th, 2010

Mortgage rates can’t do all the heavy lifting



Back on July 19, we wrote a post titled “It takes more than just low mortgage rates.” Despite mortgage rates falling even further, mortgage activity was the lowest it has been in over a decade:

It takes a lot more than just low mortgage rates to spin the wheels of the housing market; and that couldn’t be more apparent than it is right now. Mortgage rates continue to fall week after week — according to the weekly average for the 30-year Conforming fixed rate fell to 4.69% (week ending 7/16/10) — and yet the Mortgage Bankers Association reported the lowest level of mortgage application activity since 1996.

The latest issue of HSH’s Market Trends Newsletter spins the same cautionary tale: low mortgage rates alone won’t help the housing market recover anytime soon. The latest Market Trends — “Mortgage rates steady, housing weak” — explains that, especially in a deflationary environment, and at a time when there is virtually no support for job growth, low mortgage rates can only contribute so much to the overall improvement in housing (at least at the moment):

While near-record low mortgage rates have kept homeowners and mortgage lenders busy with refinancing, the same cannot be said for the nation’s builders and Realtors. Low rates can only do so much to spur demand.

Mortgage rates can be a catalyst for quickened activity, but they are insufficient in times of deflation. There needs to be some additional reason for people to act.

The housing market is dealing with deflation, not on any economy-wide basis but in asset deflation — specifically, continued downward pressure on home prices.

There really wasn’t much change in mortgage rates last week:

As far as rates go, HSH’s overall mortgage monitor — our weekly Fixed-Rate Mortgage Indicator (FRMI) — saw the average rate for 30-year fixed-rate mortgages remain unchanged to begin Autumn at 4.75%. Thirty-year FHA-backed mortgages rolled out lender doors at an average rate of 4.44% [last] week, while the FRMI’s Hybrid 5/1 ARM cousin showed up at 3.67%, down five basis points (.05%) from [the week ending 9/17/10].’s FRMIs include rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public.

CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Mortgage rates steady, housing weak.”’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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2 Responses to “Mortgage rates can’t do all the heavy lifting”

  1. One Third of Americans Unable to Get 30 Year Mortgages in September 2010 « The Best Business News Says: September 28th, 2010 at 12:04 am

    [...] Mortgage rates can’t do all the heavy lifting ( [...]

  2. Mortgage Loan Products Around the World – Is the World Becoming One Big Foreclosure or Short Sale? « Better Homes and Gardens Real Estate Metro Brokers Says: September 29th, 2010 at 6:30 am

    [...] Mortgage rates can’t do all the heavy lifting ( [...]

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About the HSH Blog'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 and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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