Mortgage rates: The lowest they’ve ever beenby Keith Gumbinger
Mortgage rates moved a little further into record territory last week. Unless a spate of solid economic news should show, there’s little reason to expect any strong reversal of the trend of small declines which has run for seven weeks now. However, as the data hasn’t been exactly bleak, even a handful of decent reports would be sufficient to reverse the trend.
For now, we should just sit back and enjoy the ride.
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 eased by three basis points (0.03 percent) for the week, and at 4.12 percent, now stands at a new record low.
The FRMI’s 15-year companion shed four basis points (0.04 percent), slipping to a new record low of 3.35 percent.
Important to homebuyers and low-equity-stake refinancers, already-low FHA-backed 30-year mortgages fell by another two basis points to 3.77 percent, while the overall average rate for 5/1 Hybrid ARMs was down three basis points (0.03 percent), and finished at 2.94 percent for the survey period.
With mortgage rates down, perhaps homebuying will again pick up. The warm winter months seem to have “advanced” some sales from this spring, but fresh lows for mortgage rates are just the thing to get homebuyers to come back into the market.
Can we count on continued Fed support?
The Federal Reserve is obviously following the changes in the economy very closely, since their present program of support comes to a close in about six weeks. One of the keys to deciding whether or not to continue support is whether or not the work they’ve already done is fostering more inflation than they expect. Fed Chairman Bernanke has noted that he believed that the effect of higher energy costs will prove transient, and the Fed will likely be encouraged by the most recent data on prices.
Mortgages: We’re in a sweet spot
Low rates, moderating inflation and economic news suggests we will have a chance to improve on the 2.2 percent rise in GDP for the first quarter of 2012. While things could of course be better, we are in a relative sweet spot for mortgages; more growth or more inflation would cause them to rise to a degree.
That said, without more growth, it will remain hard for many people–even those with jobs–to take full advantage of them, be it by buying a home or refinancing one. It’s not quite a Catch-22; slightly stronger growth and an improving labor market would probably only push us up from record lows to merely unbelievable levels, so any “damage” from such a rise would be minor at best.
This week brings a busier calendar in terms of economic data. It seems to us that modest improvement will be the general tone all around, and mortgage rates hold steady for the week.