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WASHINGTON — The average interest rate for a 30-year mortgage dropped to a record low of 4.71 percent this week, pushed down by an aggressive government campaign to reduce borrowing costs. The rate, published Thursday by Freddie Mac, is the lowest since the mortgage finance company began tracking the data in 1971. The previous record of 4.78 percent was set during the week ending April 30 and matched last week. The Federal Reserve is pumping $1.25 trillion into mortgage-backed securities to try to bring down mortgage rates, but that money is set to run out next spring. The goal of the program is to make home buying more affordable and prop up the housing market.

Despite the government support, qualifying for a loan is still tough. Lenders have tightened their standards dramatically, so the best rates are available to those with solid credit and a 20 percent down payment. Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders across the country. Rates often fluctuate significantly, even within a given day, often tracking yields on long-term Treasury bonds. This week drop reflects a rush of investors into the security of government debt after concerns about financial trouble in Dubai drove investors to safe harbors. But rates climbed back later in the week, and analysts say they are likely to remain volatile. “There are no guarantees that mortgage rates are going to stay at these low levels,” said Greg McBride, senior financial analyst at Bankrate.com.

And millions of American families have not been able to take advantage of them, particularly in the areas where home prices have fallen the most. About 11 million households, or 23 percent of homeowners with a mortgage, owe more on their home loans than their house is currently worth according to First American CoreLogic, a real estate information company. That makes refinancing difficult. While the government has launched a program designed to help these “underwater” borrowers, only about 140,000 homeowners have used it so far. In Orlando, mortgage broker Chris Brown says the low rates are a boon to first-time homebuyers who can qualify for a loan. But he says he isn’t getting much business from homeowners looking to refinance. “Most of the people that could refinance probably have” done so, he said. “Rates have been artificially low for quite some time.”

The average rate on a 15-year fixed-rate mortgage fell to a record low of 4.27 percent, from 4.29 percent last week, according to Freddie Mac. Rates on five-year, adjustable-rate mortgages averaged 4.19 percent, up from 4.18 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.25 percent from 4.35 percent. The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 points for 30-year loans. The fee averaged 0.6 points for 15-year, five-year and one-year loans. Buyers and homeowners who want to refinance are picking up their phones. Mortgage applications rose 2 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday, driven by a more than 4 percent increase in purchase applications and a nearly 2 percent increase in applications to refinance existing loans.

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This email just came to me this morning from my mortgage guy.  I tend to agree with him based on some of the things I have been reading lately on cnbc.com.  Take for example this article http://www.cnbc.com/id/33616897 which talks about the unwinding of the artificially cheap credit we have had access to in the last few years.
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Letter from Kevin

Just wanted to supply you with some current market information. Two points of interest:

• Homebuyer Tax Credit Extension – Should become “Official” soon. The bill has passed the Senate and needs to be approved by the House of Reps. & signed by President Obama

• Interest rates will likely go up – When? Your guess is as good as anyone’s. My crystal ball gets a little cloudy at times.

Bottom line for home buyers…..Now is still the time to buy. Just because the tax credit is going to be extended, with the potential for higher interest rates and tighter lending guidelines, purchasing power will likely decrease as time goes on.

As usual….if you have any questions, feel free to call me anytime.
Thanks,
Kevin McSwain
(Kevin’s contact information can be found on my Rolodex tab above.)

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“In southern California, the action was housing. Across the nation, the value of property was increasing monthly at an annual rate of 17 percent but the truly spectacular boom was in the splendid towns and cities along the Pacific coast south of Los Angeles. (Sounds like similar housing appreciation that was experienced during this last boom) The San Diego Board of Realtors had doubled its membership since 1975. In affluent communities like Newport Beach, housing values increased by 100 percent in less than five years.  (Sound familiar? Only this time all price points were affected not just affluent areas) Herbert Young, president of Gibraltar Financial Corporation, a Los Angeles savings and loan, kept thinking the market would cool off as interest rates on home mortgages continued to rise. In the beginning of 1985, the mortgage rate in California was 9.25 percent. A year later it hit 10.75 percent. By September, it was above 12 percent.  “I would have sworne that the 11.5 would put a nail in the coffin,” Young said. “But the buyers out here are voracious.” Instead of looking backward, home buyers were looking forward. “People usually look back to six or nine months ago and they see lower rates and they expect those rates to return.” Young explained. “But that didn’t happen. This time, they were looking ahead and saw higher rates.” (Yes our interest rates have remained lower but people still saw the price of housing increasing so fast it was hard to resist jumping in.  Everyone was also looking forward this time as well.) People were not simply buying homes to live in or even as long-term investments. They were buying homes in order to sell them again quickly. (Can you say flipping?) The Irvine Ranch, a huge housing development in Orange County, was celebrated for the transaction in which a buyer bought a condominium for $87,050 and resold it two weeks later – before the mortgage closing was completed – for $117,500. (Don’t you wish that prices were still this low. Oh, and wouldn’t it be nice to flip a property without having to do anything other than re-sell it?) David Parry, an economist studying the real-estate boom in the San Francisco Bay area, overheard a conversation between two buyers in a Contra Costa County subdivision. Between them, they were purchasing six houses on six different streets. The manager of the development conceded that 60 percent of his sales were to people who did not intend to live in the homes. (Hmm. can you say Florida, Nevada, Arizona, California?) “You could see the speculation in the advertisements,” Parry said. “Homes were advertised for resale that hadn’t been built yet. In the ads, they used pictures from the housing brochure.”

This excerpt was from the boom.  In my next post, I will share another passage that talks about what happened when the Federal Reserve implemented its policy of limiting the money supply and letting interest rates react to this tightening.

Rates for 30-year home loans dropped for the third-straight week, inching toward a record low reached this year, Freddie Mac said Thursday.  The average rate for 30-year fixed mortgages was 5.14% this week, down from 5.2% last week.  Last year at this time, the average rate for a 30-year mortgage averaged 6.26%, Freddie Mac said.  The rates do not include add-on fees known as points.  Borrowers in the Milwaukee area generally prefer not to pay points and as a result receive somewhat higher interest rates.

30-year mortgage rates are up again

Associated Press Washington- Rates for 30-year home loans edged up last week, remaining above record lows reached over the spring.  The average rate for a 30-year fixed mortgage was 5.42%, up from 5.38% a week earlier, mortgage company Freddie Mac said Thursday.  “Mixed economic reports on the state of the housing market helped hold mortgage rates fairly flat,” Frank Nothaft, Freddie Mac’s chief economist, said in a statement.  Rates on 30-year mortgages fell to a record low of 4.78% this year.  But then they rose as high as 5.6% earlier this month after yields on long-term government debt, which are closely tied to mortgages rate, climbed as investors worried that the huge surplus of government debt hitting the market could trigger inflation.  Since then, the yield on the 10-year Treasury note has fallen back from an eight month high of 4.01% reached last week to 3.61% Thursday afternoon.  Although there are signs the troubled U.S. housing market is beginning to stabilize, higher rates could threaten or slow any recovery, since prospective buyers would be able to borrow less money and might decide to hold off on their purchases.

Rates for 30-year loans fall after 7-month high

Washington- Rates for 30-year home loans fell back last week after soaring to the highest level in seven months a week earlier.  The average rate for a 30-year fixed mortgage was 5.38%, down from 5.59% a week earlier, mortgage company Freddie Mac said.  Rates had risen for three consecutive weeks after yields on long term government debt had been climbing as investors worried that the huge surplus of government debt hitting the market could trigger inflation.  The average rate on a 15-year fixed-rate mortgage fell to 4.89% down from 5.06% last week, according to Freddie Mac.  The rates do not include add-on fees known as points.  The nationwide fee averaged 0.7 point last week for 30-year and 15-year mortgages.  Borrowers in the Milwaukee market generally prefer not to pay up front points and as a result receive somewhat higher interest rates.

Mortgage rates jump, slowing refinancing

Rates for 30-year home loans jumped to the highest level in seven months this week, leading to a slowdown in refinancing activity, Freddie Mac said.  The average rate for a 30-year fixed mortgage was 5.59% last week, up from 5.29% the previous week, Freddie Mac said.  The last time the average 30-year fixed-rate mortgage was higher was the week ended Nov. 26 of last year, when it averaged 5.97%.  The average rate on a 15-year fixed-rate mortgage rose to 5.06%, up from 4.79%, according to Freddie Mac.  Rates on five-year, adjustable rate mortgages averaged 5.17% up from 4.85%  Milwaukee-area borrowers generally prefer not to pay upfront points and are offered slightly higher interest rates as a result.

Low interest sparks refinancings

Mortgage rates hover below 5%

AP-Washington- Rates on 30-year mortgages inched downward last week, remaining below 5% for the tenth-consecutive week and just above record lows. Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year, fixed-rate mortgages dipped slightly to 4.82% last week, down from an average of 4.86% the week before. The all-time low of 4.78 was recorded on the weeks of April 2 and April 30. Freddie Mac’s survey dates back to 1971. Low rates have sparked a surge in refinancing activity. The Mortgage Bankers Association said Wednesday its index of application volume climbed 2.3% last week from a week earlier. Applications to refinance existing loans made up nearly 75% of all applications. To revive the economy, mired in the worst slump in decades, the Federal Reserve has cut its key interest rate to a record low near zero and is expected to hold it there well into next year. The Fed also has turned to unconventional tools to lower long term interest rates and spur spending, which would help bolster economic activity. The Fed at its meeting in March launched a bold $1.2 trillion economic-revival effort. It agreed to start buying up to $300 billion worth of government debt over the next six months and to boost purchases of mortgage securities and debt from Fannie Mae and Freddie Mac. At the April meeting, some Fed policy-makers said additional purchases “might well be warranted at some point to spur a more rapid pace of recovery,” According to documents released Wednesday.   Qualifying for a loan, however, is still tough. Lenders have tightened their standards dramatically over the past year, so the best rates are available to those with solid credit. Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a give day. The average rate on a 15-year, fixed-rate mortgage fell to 4.5% this week from 4.52% last week, according to Freddie Mac. Rates on five-year, adjustable-rate mortgages dropped to 4.79% from 4.82% last week. Rates on one-year, adjustable-rate mortgages rose to 4.82% up from 4.71%. The rates do not include add-on fees known as points. The nation-wide fee averaged 0.7 point last week for 30-year and 15-year mortgages and averaged 0.6 point for five-year and one-year adjustable rate loans. Milwaukee-area borrowers generally prefer not to pay up front points and as a result receive slightly higher interest rates.