August 8th, 2011

Economy sends mortgage rates down to new 2011 lows



2011-3DDuring the last week of July, fears that a vote to increase the nation’s debt ceiling wouldn’t come in time and that the U.S. could possibly face a credit downgrade kept mortgage rates at bay. 

While a new national debt limit was signed into law last week, the United States officially had its AAA credit downgraded late in the day on Friday. As a result, Fannie and Freddie–who are 100 percent controlled by Washington–have been downgraded as well.

What does a downgrade mean for mortgage rates? 

The downgrade should mean that borrowing costs will rise. Mortgage rates should be increasing.

However, the one factor that has seemingly been a mainstay in keeping mortgage rates historically low for the last few years now has been and still is the fragile economic situation, both here and overseas.

Mortgage rates fall to new 2011 lows 

“Last week was a real whipsaw,” says VP Keith Gumbinger. Fear of a new recession forming ran rampant across the markets last week, leaving investors scrambling to place their money in the safest place possible. This “flight to quality” caused Treasury yields to fall and dragged mortgage rates right along with it.

According to the latest figures from’s broad-market mortgage tracker—our weekly Fixed-Rate Mortgage Indicator (FRMI)—found that the overall average rate for 30-year fixed-rate mortgages decreased by fifteen basis points (0.15), moving to an average of 4.65 percent last week, a 2011 low.

View current mortgage rates

On Friday, the 30-year conforming fixed rate dipped to 4.41 percent, also a 2011 low.

“Aside from this week, we haven’t dipped under 4.50 percent since last November,” says Gumbinger. “This represents another fantastic opportunity for borrowers to refinance, or to increase their purchasing power if they are thinking of buying a home.

“For borrowers who need jumbo mortgages, there may be just enough time to get a deal in place to take advantage of these rates before the new loan limits start to show in the market.”

FHA-backed 30-year fixed-rate mortgages, especially important to first-time homebuyers and low-equity refinancers, saw a sixteen-basis-point (0.16) decline to close last week at 4.31 percent. 

Given the wide differential in interest rates, at least some borrowers should be considering hybrid 5/1 ARMs. The five-year fixed-rate periods of these loans declined by seven hundredths of a percent to close the week at an average of just 3.29 percent. (A borrower with a $300,000 loan willing to accept the risk of higher future payments would save about $20,000 over the next five years.)

What’s in store for this week? 

Believe it or not, despite all the volatility, the downgrade and negative reports last week, the economy saw one faint ray of sun on Friday when the employment report registered 117,000 new jobs, a good deal more than economists had expected.

New: Two month forecast for mortgage rates

That lone report provided an upward nudge to mortgage rates. It also drove the yield for the 10-year Treasury upward by some 17 basis points from Thursday’s closing yield.

With mortgage rates starting this week on the decline, that upward nudge will be reversed (if it hasn’t been already), and we expect mortgage rates to end the week about where we’re starting it.

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2 Responses to “Economy sends mortgage rates down to new 2011 lows”

  1. Real Estate – Interest Rates at Historic Lows Again « Diana Wu — Says: August 9th, 2011 at 9:09 am

    [...] Economy sends mortgage rates down to new 2011 lows ( [...]

  2. How low can rates go? « craigkamman Says: August 11th, 2011 at 8:22 am

    [...] Economy sends mortgage rates down to new 2011 lows ( [...]

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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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