Rates drop to lowest levels in two months
July 13, 2009 by admin
Home mortgage rates have dropped to their lowest levels in the past two months, following a broad sell off by the stock market and renewed concerns that the worlds economic recession could linger much longer than anticipated. The average rate for a thirty year fixed rate mortgage loan is approaching five percent (5.2% nationally) and fifteen year loan terms were available under five percent with most national mortgage lenders late last week. Most lenders quote rates with a minimum of a half of percent point included, Freddie Mac, one of the nations largest agency mortgage lenders and financers of conventional mortgage loans reported that during the same period in July of 2008, fixed rate mortgage loans were in the six point five percent range.
The drop in mortgage rates is in direct correlation to the broad market sell off for stocks. The stock market has dropped in excess of six hundred points; oil prices have dropped over ten dollars per barrel and the yield on the ten year Treasury bond is now hovering near 3.35% after surpassing the 4% range in early June. Investors tend to move in and out of the bond and equity markets as they try to position themselves for growth or against defensively against future economic uncertainty.
The past thirty days has added an enormous level of uncertainty into the market. The June jobs market showed a much larger increase with unemployment than most economists were predicting. The anticipation for a national unemployment rate to exceed ten percent this year is all but a certainty. The increase pressure on the jobs market is likely to carry over to every area of the economy from consumer confidence, to housing and ultimately GDP growth. The labor market uncertainty seemed to add fuel to the fire of the perception that the economic challenges are going to be much harder to fix than the equity market was anticipating during its thirty percent surge from March through May.
The big winner with mortgage rates are home owners who have yet to lock into a lower refinance mortgage rate and home buyers who have been reluctant to purchase a property. Lower mortgage rates have yet to dramatically impact new home purchase, but will be a necessary component in the governments plan to try and stabilize the real estate market. The government has committed billions to the housing industry through tax rebates for first time home buyers, financial incentives for loan servicers to offer loan modifications to struggling homeowners and the implementation of purchasing mortgage bonds through the Federal Reserve. The sudden rise with rates in early June spread a tremendous amount of fear and anxiety through the real estate community as well as the government. The drop with mortgage rates from nearly 6% down to 5.25% helps to save a home owner almost $80 per month on a two hundred thousand dollar home. The lower rates also help buyers to qualify to purchase larger homes and will likely help stabilize the housing market by keeping more buyers in the game and helping to remove the excess inventory. Home mortgage rates have been extremely volatile in 2009 and could again move up without notice if investors belief that equity positions offer a better roi or if there is inflationary pressure from rapidly rising oil prices.