Current Mortgage Rates Plateau and Prospect of Record Low Recedes

Posted by  on Oct 12, 2010

Current Mortgage Rates

Freddie Mac says that the average rate for a 30-year, fixed rate mortgage (FRM) was 4.75 percent during week ending June 17. That's slightly up from the previous week's 4.72 percent, but still very close to the best mortgage rates in recent times, which averaged 4.71 percent during week ending December 3, 2009.

In a statement, Frank Nothaft, Freddie Mac's chief economist, acknowledged the housing market's problems, but foresaw a rosier future as the economy and consumer confidence recover. He observed:

...household balance sheets have been improving over the past four quarters. In aggregate, households gained $6.3 trillion in net worth in the first quarter from a year ago, according to the Federal Reserve . In addition, homeowners have regained $1.1 trillion in home equity over the same time period.

Refinance Applications Recover

Many people who have been putting off refinancing saw last week's near-best mortgage rates as their cue to get a move on. The Mortgage Bankers Association (MBA) reports that its Refinance Index jumped 21.1 percent during week ending June 11 compared with the previous seven days. That's not a huge surprise because refinancings are always especially sensitive to mortgage loan rates.

The Purchase Index also rose (though only by 7.3 percent), breaking a six-week run of falls. However, Michael Fratantoni, the MBA's vice president of research and economics, wasn't yet ready to call this reversal of the trend a rebound.

Today's Mortgage Rates Set to Rise?

Earlier this month, both Fannie Mae and the MBA updated their mortgage rate forecasts, and both are predicting continuing gentle rises. The MBA, for example, expects 30-year FRM rates to reach an average of 5.4 percent by the end of this year, six percent by the end of 2011, and 6.6 percent by the last quarter of 2012. The same forecast predicts that the median price of existing homes will increase by a little over $10,000 by December 2012.

These increases in mortgage loan rates and house prices may sound insignificant, but a few minutes with the shoprate.com mortgage calculator reveals a different story.

Someone buying a home at this quarter's median price for existing homes with a 30-year FRM at Freddie Mac's current mortgage rates would pay $902.77 a month, which is $325,070 over the lifetime of the mortgage. The same person buying the same home at the price and rate predicted by the MBA for the last quarter of 2012 would pay $1,172.58 a month, or $422,128 over the 30-year loan. That's a monthly payment difference of very nearly $270, and a total saving of $97,000.

Compare Mortgage Rates Now

If those figures have convinced you that now is the time to buy or refinance, compare mortgage rates here.


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