Long-term Mortgage Rates Plummet
McLean, VA – Freddie Mac today released the results of its Primary Mortgage Market Survey in which the 30-year fixed-rate mortgage (FRM) averaged 5.87% with an average 0.5 point for the week ending March 20, 2008, down from last week when it averaged 6.13%. Last year at this time, the 30-year FRM averaged 6.16%.
"Mortgage rates fell this week as various actions were taken to improve market liquidity," said Frank Nothaft, Freddie Mac vice president and chief economist. "In addition, the inflation report from the Consumer Price Index (CPI) reflected weaker price increases than consensus expectations. Unchanged in February both including and excluding food and energy costs, it is the first time the core CPI did not report a monthly increase since November 2006.
Comment: Mortgage rates have come down by almost a full percentage point in the last 9 months, from 6.74% to 5.87%, a drop of .87%. For a $200,000 fixed-rate mortgage, that's a $113.43 monthly savings. Falling interest rates, along with falling home prices, will certainly be important factors in the real estate recovery process.
2 Comments:
... all U.S. interest rates are lower.
Falling mortgage rates are not automatically a positive factor in "recovery".
Potential mortgagees will now have a much tougher time getting a mortgage at all -- no matter how attractive the advertised interest rate. Lenders are much more cautious handing out their cash on long term bets.
The old rule-of-thumb that a mortgage loan should not exceed two-and-one-half-times the borrowers gross income -- seems a much wiser dictum nowadays. But that rules out mortgages on vast numbers of For-Sale properties... based on median American incomes.
"based on median American incomes."
Which have absolutely nothing to do with the mortgage market because they include the 33% of American households who are what is known as "renters".
Drop the bottom third from the income equation and housing prices start making more sense.
Funny how that works.
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