Mortgage Loan Rates Teetering
For several weeks the interest rates on 30 year fixed mortgage
loans and 15-year fixed mortgage loans have been teetering on all-time lows.
Last week, Freddie Mac
, the government sponsored mortgage originator, announced that their 30-year rate was at the lowest point since the 1950s. Since the rate broke the old low at 4.32%, experts have been predicting it to slowly drop below 4%. Last week the rate checked in at 4.15% but managed a modest rise to 4.22% this week.
The 15-year home mortgage rate rose to 3.44% from 3.36% last week.
The rise in home loan rates is to some degree a result of an increase in Treasury bond yields. Mortgage rates and the treasury yield are correlated, with their ebbs and flows affecting one another. Recently, the Federal Reserve decided to keep the treasury yield interest rate stable through 2013, encouraging fence-sitting investors to buy stock in treasury bonds.
Even though mortgage rates are experiencing historic lows, loan applications have fallen to their lowest point in 14 years. Prospective buyers are still being dissuaded by the unstable global economy and high unemployment rate. Ironically, the people who would be best served by the low rates – struggling home owners stuck in high interest-rate loans – are unlikely to get them due to tightened lending regulations.
Not only are mortgage rates low, but home prices are falling as well. Home prices are down 5.9% from where they were at this time last year.
One piece of interesting news: with millions of homeowners still struggling with upside down mortgages and the such, some experts believe the federal government is considering taking advantage of the record low mortgage rates by developing a program to help Americans refinance their loans (hopefully more helpful than the HAMP).
If any plan is enacted it will be designed to help a vast pool of Americans. Refinancing millions of struggling mortgages would, in theory, free up some spending money and thus stimulate the economy.