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December 3rd, 2012

Mortgage rates reach new lows

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The economy “expanded at a measured pace” though mid-November, according to the Federal Reserve. Without a strong trend to push them one way or the other, mortgage rates are mostly wobbling in a small range with little traction to move in either direction. Certainly, hopes (or lack thereof) of a resolution to the impending “fiscal cliff” would have an effect on mortgage rates, but with none in sight at the moment, it’s back and forth we go.

Mortgage rates fall to record lows

HSH.com’s broad-market mortgage tracker–our weekly Fixed-Rate Mortgage Indicator (FRMI)–revealed that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) declined by four basis points (0.04 percent) to 3.62 percent, setting a new record low by a single basis point.

Almost all the downward pull was due to falling jumbo mortgage rates, which fell by eight basis points to a new record low of 3.88 percent.

The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) also moved downward, sliding by three basis points (.03 percent) to rematch a record low of 2.96 percent.

FHA-backed 30-year fixed-rate mortgages tied their bottom mark, slipping by two hundredths of a percentage point to 3.29 percent. Finally, the overall average rate for 5/1 Hybrid ARMs shed a single basis points to close the survey week at 2.70 percent.

Spending increase helps economy

While there is little evidence to support any idea of a fast-rising economy, the second estimate of Gross Domestic Product growth was pushed 0.7 percent higher to a 2.7 percent rate. Although the report was expected to show a slight decrease in growth (if any change at all), the upward revision for the quarter came from the strongest level of government spending in three years, so it’s not as though there was any sudden material improvement in the consumer or business climate, at least not on a widespread basis.

Mortgage rates helping home sales

For years, the Fed has been conducting regular campaigns to support housing markets, and with good effect.

12.3.12With fiscal policy still hamstrung, low interest rates have been virtually the only stimulus game in town for some time now. With mortgage rates enticingly low, sales of existing homes have been generally rising for a while, and sales of new homes have revived from very low levels to find relatively firm standing, too.

After a downwardly revised annual rate for September, October’s annual rate of new home sales came in at 368,000 units, and the last four months show a virtually flat pattern at that level. In fact, if May and June numbers are factored, sales of new homes have been holding at these improved levels for the past six months.

As with other reports, there does appear to be some effect from Hurricane Sandy, as both the south and northeast components of the October report showed declines in those regions. Of course, with inventories of unsold homes holding at a lean 4.8 months, there remains plenty of space for both construction and sales to grow, provided the economy isn’t tanked by either the fiscal cliff or any budget and tax agreement.

Rock-bottom mortgage rates expected to continue

As even casual readers know, slow or slowing growth with no inflation are ingredients for low or lower mortgage rates. Add to that a Federal Reserve committed to fostering low mortgage rates, and one which seems increasingly likely to embark on a new round of bond buying when Operation Twist expires, and we should see plenty of chances to nab a rock-bottom mortgage rates for a while yet.

For the most part, mortgage rates should continue to wobble back and forth over record lows; if the underlying data (and especially employment and ISM reports) are better than expected, we could see mortgage rates nudge upward by a few basis points.

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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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