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January 17th, 2011

Another subtle decline in mortgage rates last week

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Seesaw percent and houseThe end of 2010 brought us an increase in mortgage rates. So far, the first couple weeks of 2011 have brought declining mortgage rates. This is certainly good news for those who made a New Year’s resolution to buy a home or refinance their current mortgage:

An improving economy largely fostered that rise, but year-end investor positioning likely played a role as well. Now that we’ve passed the holiday and vacation season, there seems to be a growing realization that a mild recovery is the most likely to occur, even if it features a slightly faster rate of growth.
Mortgage rates experienced another gentle slide in the second week of 2011:
HSH.com’s overall mortgage tracker — our weekly Fixed-Rate Mortgage Indicator (FRMI) — found that the overall average rate for 30-year fixed-rate mortgages slipped back by another seven basis points (.07%) [last] week, ending HSH.com’s national survey at 5.05%. FHA-backed offers, so crucial to first-time homebuyers and low-equity refinancers, decreased by another five basis points to 4.72%, while the overall average rate for 5/1 Hybrid ARMs moved downward by eight basis points (.08%) to 3.81%. The gap between long-term fixed rates and the most common hybrid ARM should makes them at least a consideration for homebuyers and refinancers with short time horizons. HSH.com’s FRMI and other public data series includes rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so cover much of the mortgage-borrowing public.
While some market observers have adjusted their expectations for economic growth in 2011 higher, it still may not be enough to foster the swift growth needed to turn the job market around. As we mentioned at the top of the post, that lack of robust growth should come as good news to mortgage shoppers looking for the lowest rate possible:
Both inflation and economic growth are likely to persist on a slight firming trend as 2011 progresses. Many forecasts for growth have been bumped higher, moving from the upper two percent range for GDP to a lower three percent one. That’s certainly an improvement, but not so strong that it should create much stronger price pressures or trim the ranks of the unemployed very quickly. Collectively, that’s good news for mortgage shoppers; as we mentioned here over the past couple of weeks, the run-up in interest rates did seem to have overshot the mark somewhat, at least relative to the amount of economic activity and inflation in the present environment. With this week’s easing of rates taking us back to early December levels, we have erased at least some of that overage.
Looking for a more long-term forecast for mortgage rates? If so, be sure to read our 2011 forecast for mortgage rates and the mortgage market.
CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Mortgage rates continue gentle slide.”

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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One Response to “Another subtle decline in mortgage rates last week”

  1. Tweets that mention Another subtle decline in mortgage rates last week | HSH Financial News Blog -- Topsy.com Says: January 17th, 2011 at 2:00 pm

    [...] This post was mentioned on Twitter by HSH Associates. HSH Associates said: Another subtle decline in mortgage rates last week: The end of 2010 brought us an increase in mortgage rates…. http://bit.ly/eZy5By [...]

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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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