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September 10th, 2012

Mortgage rates find new record lows

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Below is an excerpt from our latest Market Trends newsletter. Be sure to sign up to receive it in your inbox Friday evening.

int rate QMarkAlthough the collective tenor of the economic data released last week was fair, it was capped by a disappointing employment report for August.

At a time of global economic troubles beyond its direct influence, and with the U.S. economy holding onto modest growth, how compelled is the Federal Reserve to make a move, especially a substantial one?

Mortgage rates drop to new records

Mortgage rates retreated again last week, taking back another bit of the mild August rise.

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 jumbos) declined by another three basis points (0.03 percent) to 3.86 percent.

The FRMI’s 15-year companion also decreased by three basis points, sliding to 3.14 percent and matching its record low.

Important to homebuyers and low-equity-stake refinancers, FHA-backed 30-year mortgages eased back down to 3.46 percent, while the overall average rate for 5/1 Hybrid ARMs finished the weekly survey at 2.74 percent, down three hundredths of a percentage point from last week, establishing a new record low.

Dismal job numbers in August

Despite the continued economic uncertainty, one thing for certain is that more hiring didn’t happen in August.

The latest employment report found just 96,000 new hires took place during the month, dashing hopes for a stronger showing. Earlier last week, payroll-service company ADP reported a number about double the labor department figure, and some analysts marked up their expectations for turn.

Making matters a little worse were downward revisions in the numbers reported in July and June, so the pattern–while considerably better than that seen in the spring–didn’t improve all that much during the summer.

The nation’s official rate of unemployment retreated to 8.1 percent for the month, but that was largely due to another decline in the number of folks actively seeking a new job. Perhaps the lure of a lazy end of summer kept folks from pounding the pavement looking for work.

Will the Fed hold their fire?

Odds are probably 50-50 at the moment. A stronger employment report on Friday might have made that perhaps 60-40 in favor of holding steady. Equity markets have had a very good time of it over the past few months, and major indexes are close to or at four-year highs. A huge change in policy might signal that the Fed is gravely concerned about prospects for the economy in the near future, and that might have unintended consequences, even causing a stock market selloff.

Lifting asset prices (”inflation” of a sort) is one of the Fed’s goals, and they would be loath to see stock prices get battered at this point. An interesting note, though: Fed inaction might disappoint the market, too, but that would tend to see money slosh from stocks into bonds… which would tend to lower rates, so the Fed might get some desired results by doing nothing, too.

One thing to keep in mind, too: Any actions by the Fed take time to work their way through the economy, including low interest rates. Regardless of anything the Fed may or may not do, mortgage rates remain at unbelievable levels, and we will probably not see much change in that this week.

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One Response to “Mortgage rates find new record lows”

  1. Housing Headlines 9/10-9/14 : AllPropertyManagement.com Says: September 14th, 2012 at 12:01 pm

    [...] Record Low Rates for Mortgages [...]

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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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