Mortgage rates break previous record-low set in 2010

The big news during the first week of August was that mortgage rates fell to 2011 lows.

The big news last week was that mortgage rates fell even lower, beating records set back in October of 2010.

30-year overall average

HSH.com’s broad-market mortgage tracker—our weekly Fixed-Rate Mortgage Indicator (FRMI)—found that the overall average rate for 30-year fixed-rate mortgages (conforming, expanded-conforming and jumbo rates) decreased by 12 basis points (0.12), moving to an average of 4.53 percent, besting the previous low of 4.58 percent, set for the week ending October 22, 2010.

Mortgage rates matter more than home prices

Conforming 30-year fixed-rate

Conforming 30-year FRMs didn’t quite make it into record territory, falling just four basis points shy of hitting last year’s near 56-year low.

FHA mortgage rates

FHA-backed 30-year fixed-rate mortgages (especially important to first-time homebuyers and low-equity refinancers) saw a decline of 11-basis-points (0.11) to close the week at 4.20 percent.

Hybrid 5/1 ARMs

The five-year fixed-rate periods of these loans declined by four hundredths of a percent to close the week at an average of 3.25 percent.

Even though the interest rates on fixed-rate loans are in record-low territory, given the wide differential between fixed and adjustable interest rates, a case could be made that some borrowers might do better for their situation (and even save thousands more) by selecting a hybrid 5/1 ARM. 

Embracing ARMs: Low rates make them more attractive

Jumbo mortgage rates

Thirty-year FRM private market jumbos are now available at an average 4.87 percent, and are sliding deeper into record territory. With the loan limits for agency jumbos starting to decline in the market, private mortgage money for these borrowers will become more important, and it is available at fantastic rates.

Mortgage rates may decline even further

Last week was one of the more turbulent weeks I’ve seen in some time.

Wide fluctuations in mortgage rates, Treasury yields and stocks, not to mention continued economic turmoil overseas, painted a pretty clear picture of an uncertain U.S. economy that can barely stand on its own two feet.

As we’ve said time and again, this type of economic climate is prime for mortgage shoppers.

Now that we are past the fear of the debt ceiling debacle, and now that the actual downgrade has replaced fear of the downgrade, we again should be turning to clues about the economy and inflation to evaluate where interest rates will go.

Learn more: Read this week’s Market Trends newsletter

This will cause rates to rise

To the extent that July’s economic numbers are warmer than June’s—feats which are not all that difficult to accomplish—mortgage rates will tend to respond by firming slightly. Any report that is less terrible than expected, and especially anything that quells fear or otherwise removes the immediate need for the safe-haven parking of money, will serve to firm up mortgage and other interest rates.

This week…

We should start this week on a lower note, but may not end there, even if we aren’t likely to go very far.

Be sure to read our latest two-month forecast for mortgage rates.