Current Mortgage Rates and the Future
There is a well-worn saying: "Economists were invented to make astrologers look good." That truism remains popular largely because it remains true. Just six months ago, virtually all the so-called experts and commentators (including this writer) were predicting that today's mortgage rates would be higher than they were then, and would be set on a upward trajectory. The reality is 180° off.
According to Freddie Mac's latest (June 24) weekly survey, today's mortgage rates are lower than they were six months ago. In fact they are lower than they have been for more than 50 years. And the June 29 Pittsburgh Business Times quoted another, more recent source that says that the downward trend is continuing.
Best Mortgage Rates Not Really Best?
Meanwhile, Bloomberg asked June 29 whether today's record lowest mortgage rates should be even lower. It says that the credit crunch resulted in fewer lenders in the mortgage loan market, and that now just five giants account for 65 percent of all new home loans. And that means that the competitive forces that drive down prices are less strong.
This is partly due to a shift that has caused fewer borrowers to use mortgage brokers.
Now, you may struggle to feel much sympathy for these mortgage brokers--some of whom are widely blamed for many of the questionable loans that laid the economy low--but their share of the market has plummeted from 30 percent back in 2007 to 10 percent last quarter. And they often used to find home loans from smaller lenders, who are happier to compete on price, than larger ones that tend to keep prices high while attracting business by promoting their supposedly superior service delivery and ability to qualify borrowers.
Lowest Mortgage Rates to Go Lower?
This--along with a continuing appetite among investors for relatively safe, government-guaranteed, mortgage-backed securities--suggests that there may just be some room in the system for today's mortgage rates to decline further. But it could prove a mistake to expect anything like a precipitous fall.
After all, as Associated Press pointed out June 25, today's mortgage rates are already even lower than the previous record low of roughly 4.6 percent, which was set way back in the mid-1950s. Surely, it's likely that we're reaching a floor below which the whole business becomes unsustainable, regardless of the amount of government support on offer. Having said that, if this column has a mantra it's that predicting mortgage interest rates is a mug's game.
Home Refinance Now?
People who are thinking of refinancing might be tempted to hang on in the hope of seeing record lows being broken week after week. Who knows if they'll turn out to be right? But those tempted to do so should recognize that they'll be gambling with some high stakes.
There's no way of calculating the odds, but there has to be a very real possibility--arguably a probability--of home refinance rates turning round and climbing again sometime very soon. If you could do without the stress that high-stakes gambling brings, then you can compare mortgage rates--both for purchasing and refinancing--here.