Mortgage rates found even more room to fall last week as our economy shows no signs of serious improvement. While mortgage rates have found a new low point for 2011, they seem to have found the mid-way point between some highs and lows over the last eight months or so:

Along with a leveling of gains in equity prices over the past couple of weeks, at least some money has come back into bonds, taking the top off of a spike in mortgage rates which saw the conforming 30-year fixed-rate mortgage run from 4.32% on October 22, 2010 to as high as 5.09% on February 18 of this year. This week’s average of 4.74% for that most common instrument is almost exactly halfway between those two bookends.

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Today is the official start of summer, a season typical of “languid times for real estate and housing markets.”

Last week, the extension of the Homebuyer Tax Credit’s closing deadline was the big news here on the blog (be sure to vote on our new poll if you haven’t already). Congress’ decision to extend the period of time in which borrowers can close on their home loans and still take advantage of up to an $8,000 credit, is likely to be the last government interaction in this targeted support for buyers (and sellers) that has increased, yet distorted, demand.

The latest issue of HSH.com’s Market Trends Newsletter, “Low Rates, but Summer of Distortion,” examines the “the distorting effects of government policy on that demand, and wonder how markets would have fared without those intrusions into their more natural functions.”

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The big news this morning is that rates are back in historical territory. According to the latest issue of HSH.com’s Market Trends Newsletter, “After setting 2010 lows [two weeks ago], mortgage rates managed another downshift [last] week and are once again near historic — approximately 50-year — lows”:

HSH’s market-spanning Fixed-Rate Mortgage Indicator (FRMI) slipped by another six basis points, finishing HSH’s weekly survey at 5.21%. The FRMI includes rates for conforming, jumbo and the GSE’s “high-limit” conforming products in its calculation, and so covers a wider audience than other surveys. The average 5/1 Hybrid ARM — presently the most popular alternative to the traditional fixed-rate mortgage — came in at an average interest rate of 4.24%.

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At the close of business yesterday, the 30-year Conforming rate fell even further, landing at 4.99% for Tuesday’s daily average. Last week’s average rang in at 5.03% — the lowest level we’ve seen in 2010.

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Last week was a wild one — between the turmoil in Greece and the nearly-1,000-point drop in the Dow Jones Industrial Index — as investors shifted their money to safer investments (including gold and US Treasuries), causing mortgage rates to fall.

According to the latest issue of HSH.com’s Market Trends Newsletter, “Mortgage Borrowers Benefit From Fear and Panic,” uncertainties in the global markets combined with the panic caused by the massive drop in stocks has worked to the advantage of potential homebuyers and existing homeowners.

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As we predicted, mortgage rates firmed up last week, marching upward from their record lows seen on December 1.

“As expected, mortgage rates edged higher [last] week. Some better economic news, some lingering glow from November’s employment report [on December 4], and light investor demand for new Treasury debt boosted rates a little. We may see some hangover from that [this] week, if the relationship between the 10-year Treasury yield and average mortgage rates holds true.”

“For [last] week, HSH.com’s FRMI, our overall average for mortgage rates (including conforming, jumbo and agency jumbo), increased by five basis points (0.05%), closing the survey period at 5.29%. Thirty-year fixed-rate Jumbo loans rose less than conforming did, a move of five basis points compared to the eight seen for agency-backed loans. Meanwhile, the overall average for 5/1 Hybrid ARMs also saw a five-basis point upward move, closing the survey week at 4.61%.”

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On Tuesday of last week, the 30-year Conforming interest rate was among the lowest we’ve seen in several decades, according to the latest issue of HSH’s Market Trends Newsletter. By Friday, the rate did rise to 5.06%, yet, that’s still an incredibly-low rate for anyone looking to purchase or refinance.

Dangers in Playing the Mortgage Rate Waiting Game

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Mortgage rates are on a roll. Rates fell last week to their lowest levels seen all year. According to the latest issue of HSH’s Market Trends Newsletter, “Mortgage Rates Downshift, Match Year’s Low,” the conforming 30-year fixed rate dipped below the 5% mark.

“Although one might have thought that everyone knew that a sluggish economic recovery is on tap, a reiteration of this by Federal Reserve Chairman Ben Bernanke [last] Monday seemed to push some investors out of equities and back into bonds, driving yields and mortgage rates downward.”

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Over the past year or so, the daunting task facing potential homebuyers hasn’t been locking in on a low mortgage rate, it has been whether or not you can qualify for financing amidst the strict lending conditions. The last issue of HSH’s Market Trends Newsletter, “Rates Ease Back Slightly,” compares it to “a group of penniless children staring in the candy-store window: You can look, but you can’t buy.”

“Mortgage rates eased back a little bit [last] week. Although the price of money is quite attractive, the availability of it remains difficult for many borrowers.”

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Mortgage rates seem to be one of the more consistent and stable economic factors that we’re following these days. According to the latest issue of HSH’s Market Trends Newsletter, “Rates Still ‘Exceptionally Low‘,” the conforming 30-year fixed rate closed our survey week at 5.13% at a quarter-point fee level.

“The Federal Reserve re-committed to keeping the short-term interest rates it controls at ‘exceptionally low’ levels for an undefined ‘extended period of time.’ Along with the extension and expansion of the homebuyer tax credit, these important supports should help the housing market to continue to stabilize, and may even serve to promote some refinancing activity, too.”

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