This was the sixth week in a row were 30 Year mortgage rates fell or held steady. In the last 6 weeks 30 year notes have fallen from 63 to 35. This was preceded by a sudden jump in interest rates in July where 30 year mortgage interest rates rose from 26 to 63 between July 17th and July 24th. So while rates are little higher today than what we saw on July 17th they have almost fallen back to mid July levels. It's interesting to note that it took one week for rates to jump from 26 to 63 and six weeks of falling rates to get close to the July 17th levels.
This week we also saw decreases in all the other major mortgage products. The 15 year mortgage fell from 93 to 9 and the 5 year arm fell from 03 to 97. By far the biggest mover was 1 year arms which fell almost 1/5 of a point moving from 33 to 15. Below are rates for the 4 major mortgage products for the last few weeks. September 200830-yr 40 15-yr 93 5-yr ARM 03 1-yr ARM 33August 21, 200830-yr 35 15-yr 90 5-yr ARM 97 1-yr ARM 15August 28, 4, 200830-yr 47 15-yr 00 5-yr ARM 99 1-yr ARM 29August 200830-yr 52 15-yr 10 5-yr ARM 05 1-yr ARM 22Ok so what does this mean for a mortgage? Obviously ones mortgage would be lower with falling rates but by how much, 200830-yr 52 15-yr 07 5-yr ARM 02 1-yr ARM 18August 7, 14. Let's look at a 200k mortgage and using our free mortgage calculator lets fun the numbers based on today's rates. September 4th 30-yr $1244. 4715-yr $1676. 925-yr ARM $1195. 241-yr ARM $1092. 05August 28th 30-yr $1251. 0115-yr $1680. 155-yr ARM $1202. 961-yr ARM $1114. 33July 24th 30-yr $1281. 2815-yr $1707. 225-yr ARM $1219. 751-yr ARM $1134. 32So why have rates steadily fallen. I think it has to be based on rumors (which have now proven to be correct) that the federal government is going to takeover Fannie Mae and Freddie Mac.
Basically the government takeover provides more assurance to banks that their mortgage insurance is going to be paid out in case of default. The declining fortunes of Freddie Mac spooked some banks into thinking their mortgage insurance was possibly worthless. So now banks are lowering rates because in their view the risk associated with the loans has gone down. So what do I expect to see over the next few months? I would be surprised if mortgage rates don't continue to fall now that Freddie Mac and Fannie Mae are owned by the government. The Fed has been trying to push down interest rates all year and now they have the means to do so (I think this was part of the motivation behind the takeover of Freddie Mac and Fannie Mae). So does this mean investors?
Should they wait for mortgage rates to drop before buying? I don't think so. If rates continue to fall real estate prices could rise or at least I would expect to see less deals sitting on the market. Instead if you find a property to purchase I would watch interest rates and if they continue to fall I would try and relock your mortgage rate at the new lower rate. While I expect rates to fall something unexpected that spooks banks over the next month could of course push mortgage rates back up.
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