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September 26th, 2011

Mortgage rates find more room to fall

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Mortgage Rate ConceptThere were plenty of economic twists and turns last week which allowed mortgage rates to find some additional room to fall.

Fed and economy send rates downward

As we mentioned last Monday:

The “wildcard in the [mortgage rate] forecast is the Fed; if something unexpected comes in the statement which will come on Wednesday, some additional volatility in either direction might occur.”

As HSH.com VP Keith Gumbinger explains in today’s issue of our Market Trends newsletter, mortgage rates were pretty stable last week up until Thursday when the markets really got their chance to react to the Fed’s statements. The initial reaction was not good.

The Fed’s newly announced initiatives and comments following their two-day meeting last week–that ”significant downside risks to the economic outlook, including strains in global financial markets”–sent stocks into a major selloff last Thursday.

“Add this to the ever-present potential for a Greek (and possibly other) sovereign debt default, ratings downgrades for the three largest U.S. banks and a worldwide stock market rout and you’ll find yourself with new record low interest rates, mortgages among them,” writes Gumbinger.

Mortgage rates reached new lows last week

Fixed:

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, non-conforming and jumbo mortgages) decreased by four basis points (0.04 percent) last week, moving to a new record-low average of 4.34 percent.

FHA:

FHA-backed 30-year fixed-rate mortgages, especially important to first-time homebuyers and low-equity refinancers, shed two hundredths of a percentage points; in doing so, the average cracked through the 4 percent barrier to end the week at 3.99 percent.

ARMs:

Although it’s hard to recommend ARMs at a time of such low interest rates, a case can still be made for them for some borrowers. Hybrid 5/1 ARMs, the most popular among ARMs, saw their five-year fixed-rate periods fall by two basis point to finish HSH.com’s survey at 3.06 percent.

Conforming 30-year:

For a brief moment after the Fed meeting, it looked like conforming 30-year FRMs might join FHA-backed loans in breaking the four percent barrier. They had slumped to an average 4.01 percent on Thursday, but bounced back to 4.07 percent by close of day Friday.

Note: Freddie Mac’s survey, conducted at a much higher fee level than HSH.com’s, will likely fall below 4 percent by the time Thursday morning rolls around.

Will mortgage rates fall again this week?

The market seemed to settle a little bit on Friday after a truly wicked day on Thursday. Mortgage rates moved to new record lows again last week, and we seem likely to remain in that territory again this week.

While there are some new economic reports out this week, there doesn’t seem to be anything on the horizon which would come in so strong as to convince the market that the recovery is gaining speed which would move mortgage rates upward.

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One Response to “Mortgage rates find more room to fall”

  1. teri schuddeboom Says: September 29th, 2011 at 3:33 pm

    I would like to know how successful the non-profit credit counselors (through HUD, etc.) have been as far as truly enabling the homeowner facing foreclosure, to get what he wants from the bank. i.e. lowering principle, monthly payments and interest rate. I’ve heard very few banks actually lower loan amount (principle?)I’ve heard and read so many sad stories (many more than good ones)about how people paid their trial payments on time but still didn’t get a permanent modification, etc. Also, what is the true feeling regarding legitimate law firms and other firms that will take over the modification process for you and do not ask for a few up front. How successful are they?

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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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