Mortgage Rates Drop

Good news for potential home buyer was announced Thursday in a press release by Bankrate. Mortgage rates dropped, with the average interest rate on a 30-year fixed mortgage dropping to 6.75 percent. Additionally, a popular refinancing option, the 15-year fixed rate mortgage, dropped to 6.42 percent. Adjustable rate mortgages, popular for those who are only planning to be in a home for 5 to 7 years, also dropped. The 5/1 ARM sunk to 6.41 percent and the average one-year ARM dropped to 6.02 percent.

The recent drops in mortgage rates aren't the lowest we have seen over the past year however. Fixed mortgage rates are nearly one-half percentage point higher than three months ago. The press release states that this difference adds about $50 to a monthly mortgage payment of $165,000. Today, that fixed mortgage payment would cost you approximately $1070. Three months ago, your payment on that amount would have been $1020.

Mortgage rates fluctuate depending on a number of factors. According to this press release, mortgage rates move in relation to yields on long-term government bonds. This past week, investors have moved toward the conservative nature of Treasury securities. This has pushed the yield on a ten-year note below 5 percent. Spreads between Treasury yields and mortgage rates are not constant. These spreads can expand in times of nervousness or tighten in times of heightened confidence concerning borrower's payment capabilities.

Bankrate administers a weekly mortgage survey to the top 10 banks each week to compile this data. Additionally, a group of 30 to 45 expert panelists discuss trends for the short term future of interest rates. Half of the panelists from this week's panel predict that interest rates will fall even further. Approximately one third of the panel predicted that rates will remain unchanged. And, 14 percent of the panelists predicted that mortgage rates would rise to their previous level over the next 30 to 45 days.

We are in the middle of earnings season for publicly traded companies. Some experts predict that this will create an environment in which demands for bonds will weaken and stocks will look more attractive. This pattern would suggest that rates will rise.

This has truly been a strange year for mortgage rates, and home buyers are in many ways unsure about the housing market. Many experts predict that there will be great mortgage opportunities forthcoming, while others predict just the opposite. For us, the consumers, we will just have to continue to watch the trends.

Sources:

PR Newswire Press Release, http://media.prnewswire.com/en/jsp/main.jsp?resourceid=3522685&packageid=1003420

Bankrate Trend Analysis, http://www.bankrate.com/brm/static/rti.asp