Oct
06

30-Year Mortgage Hits New Historical Low

October 06, 2011

The Federal Reserve’s plan to save the housing industry by lowering interest rates has kicked in: The 30-year fixed-rate mortgage (FRM) dropped below 4 percent this week for the first time in history.

But, again, Chicago Real Estate Forum must ask: Are lower rates enough to spur a recovery?

gold percentage symbol with an arrow pointing downThe 30-year FRM averaged 3.94 percent for the week ending October 6, according to Freddie Mac. That’s a drop from last week’s 4.01 percent and the lowest average ever.

The 15-year FRM also hit a new record low, averaging 3.26 percent this week after last week’s 3.29 percent.

The 5-year Treasury-index hybrid adjustable-rate mortgage (ARM) dropped from 3.02 percent last week to 2.96 percent this week.

Only the 1-year Treasury-indexed ARM rose this week, averaging 2.95 percent after recording 2.83 percent last week.

So? Are the historically low rates making a difference?

According to the Mortgage Bankers Association latest report, applications for home loans fell 4.3 percent and refinancing activity dropped 5.2 percent.

“Interest rates continued to fall last week, driven by the latest Federal Reserve actions to invest in longer-term Treasury and mortgage securities,” said Mike Fratantoni, MBA’s Vice President of Research and Economics, “but potential borrowers largely remained on the sidelines, seemingly unimpressed by the lowest (by any measure) mortgage rates since the 1940s.”

Categories: Economy, Mortgages

About The Author

Tracey

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1 Comments

1

Hi Tracy,

We have all lived with the assumption that as mortgage rates go down, buyers can afford a more expensive home &/or home prices rise. Sorry to say that this rule does not apply when property tax rates are near or above mortgage rates. The opposite becomes true. Any benefit in a lower compounded interest rate is offset by the cost increase of a simple property tax rate calculation. What’s now become insane it that we need to hope for higher mortgage rates!

If you are confused or a doubter of this, I would love to send you a chart that helps to explain it.

Thanks,
Joe

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