Mortgage rates fall to record lows once again
A combination of mixed economic news and an ever-impending fiscal cliff pushed mortgage rates down just a little last week. Hurricane Sandy’s distortion of some of the latest economic data make it hard to clearly discern the underlying trend, but there’s nothing we can see which suggests that any imminent spurt of growth is forming anywhere.
Mortgage rates down all around
According to the latest data from HSH.com, the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) declined by two basis points (0.02 percent) to 3.60 percent, setting a new record low.
The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) also moved downward just barely, easing by a single basis point (.01 percent) to touch a new record low of 2.95 percent.
FHA-backed 30-year fixed-rate mortgages also lost a hundredth of a percentage point, as the most viable option for credit- or equity-impaired borrowers saw its average slip to 3.28 percent.
Finally, the overall average rate for 5/1 Hybrid ARMs also managed to shed a single basis point to close the survey week at 2.69 percent
Fed should keep rates low
The Federal Reserve meets this week to discuss the state of the economy and to sunset, extend or replace Operation Twist, their program of selling the Fed’s holdings of short-term Treasuries in favor of longer dated ones. The program--which included the recycling of money from old mortgage bonds into new--is slated to terminate at years’ end.
At the moment, and with low mortgage rates key to the recovery, it is widely expected that the Fed will announce a new program of outright purchases of Treasuries. This in turn should serve to keep mortgage rates low.
Mortgage rates should remain low
While some aspects of the economy are no doubt stronger, others still have minimal gains at best, and the change to tax policy and cuts in government spending (forced by cliff or from agreement) will slow the economy.
A slower economy is usually good for mortgage rates, as broad demand for credit is tempered throughout the economy. With mortgage markets already fully supported by the Fed, there may not be a huge amount of room for rates to fall, but there may be some mortgage rate declines as a result of a slower economy after the cliff comes or an agreement is reached.
Until then, we wander through murky waters, and rates can be expected to continue to be mostly directionless. For the most part, mortgage rates are in no hurry to go anywhere fast, so little change can be expected next week.
