Mortgage Rates Continue to Tumble

Well, there’s now good news on the mortgage rates front for a second week in a row … Hooray! After a year of roller coaster rides on the rate front, it’s a welcome change. In fact, mortgage applications surged by the largest amount on record last week as the new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years. It appears that lenders are digging the government’s mortgage security purchase program and guarantees on Fannie and Freddie issued bonds.

The mortgage risk-spread premium has finally abated and lenders are beginning to dip their toes into the mortgage market again. The 10-year Treasury yield has dropped below 3 percent and contributed to the second week of mortgage rate declines.

What is really important here is whether the renewed surge in home purchase applications will result in a coming stabilization for home prices, or whether offers will continue along the bargain basement path. Home values are still key for those refinancing. It doesn’t matter if mortgage rates go down to zero if a homeowner doesn’t have enough equity to qualify for a new home loan.

For those in position to purchase of refinance a home, it would be a good time to take this early Christmas present from the federal government and start locking rates.

Many feel that current low mortgage rates are here to stay for a while, but we all know that that may be wishful thinking. Until housing prices stabilize, any knee-jerk bump ups in the Treasury yield will cause rates to rise again. Much of the risk equation was settled with the government announcements last week, but home prices continue to be the unknown variable that will keep the risk premium up.

But, hey, lets celebrate for the time being as 30 Year Fixed Rate mortgages can be currently had in the sub 5.5% par rate range. Now that’s something to sing about!


May the Mortgage Refinance Rates be with You!

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