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July 18th, 2011

As anticipated, mortgage rates back on the decline



Mortgage Rate ConceptIf we didn’t make it clear enough last week, June’s employment report cemented the fact that consistent economic expansion is still a long way off.

Federal Reserve Chairman Ben Bernanke confirmed last week that while the Fed would continue to keep a close eye on the markets, their plans for ending their extraordinary supports from the market would continue as planned, despite current economic conditions.

Bottom line: While the soft economy may not bode well for GDP growth, it continues to provide great opportunities for homebuyers and refinancers.

As we anticipated, mortgage rates declined overall last week:

HSH.com’s broad-market mortgage tracker—our weekly Fixed-Rate Mortgage Indicator (FRMI)—found that the overall average rate for 30-year fixed-rate mortgages declined by 11 basis points, moving to an average of 4.77 percent.

Get your own customized mortgage quote before rates rise any further

FHA-backed 30-year fixed-rate mortgages, especially important to first-time homebuyers and low-equity refinancers, shed eight basis points to close the week at 4.44 percent.

Looking for an even lower mortgage rate?

At least some of you should be considering hybrid 5/1 ARMs given their wide differential in interest rates. The five-year fixed period now averages just 3.39 percent, down eight hundredths of a percentage point from the week prior.

How much can an ARM save you?

A borrower with a $300,000 loan, willing to accept the risk of higher future payments, would save about $20,000 over the next five years. Borrowers should stockpile those savings to help offset some of the future price changes, or bank the savings and refinance into a new fixed-rate product after the five years is up.

Will mortgage rates continue to fall this week?

“As long as there are domestic and international troubles so fully in play, a sustained or sustainable rise in interest rates seems unlikely,” writes HSH.com VP Keith Gumbinger in the latest issue of our Market Trends newsletter.

“The welcome dip in mortgage rates [last] week halted the minor rise which really only lasted about a week. We are still a little above June bottoms, and will remain there [this] week, when mortgage rates will probably nudge up a couple of basis points.”

To learn more, please read our latest Market Trends newsletter titled, “Mortgage rates slip back.”

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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