Record Lowest Mortgages Rates for Second Week
Freddie Mac's Primary Mortgage Market Survey® says that week ending July 15, 2010 saw the previous seven days' record lowest mortgage rates maintained. Frank Nothaft, a Freddie Mac vice president and its chief economist, said in a statement:
Fixed-rate mortgages continued to hover at 50-year lows, thereby supporting homebuyer affordability and refinance activity... Compared to the recent peak in 30-year fixed interest rates 13 months ago (week of June 11, 2009), current rates are a full percentage point lower. With today's rates, homebuyers would save about $1,500 in payments each year on a $200,000 loan compared to rates last June.
Average points remained at 0.7, while average rates nationally were:
- 30-year fixed-rate mortgage (FRM)--4.57 percent
- 15-year FRM--4.06 percent
- 5/1-year adjustable rate mortgage (ARM) 3.85 percent
- 1-year ARM--3.74 percent
Why Today's Best Mortgage Rates Are So Low
Mortgage loan rates tend to shadow U.S. Treasury bonds because both are seen as safe havens for money. Of course, Treasury bonds are widely regarded as the safest investment of all, but mortgages carry very little more risk along with a commensurately small increased return.
Rates for Treasury bonds are currently exceptionally low. Associated Press said July 15, 2010 that this is a result of investors shying away from the risks posed by the current debt crisis in Europe.
Current Mortgage Rates Fail to Tempt
In spite of the potential savings highlighted by Mr Nothaft, mortgage loan applications for week ending July 9, 2010 failed to take off. Indeed, according to the Mortgage Bankers Association (MBA), they declined overall. Reading the MBA press release, you could almost see the tumbleweed blowing through mortgage brokers' offices.
Using figures that are not seasonally adjusted, this year's Independence Day week saw purchase applications that were 43 percent lower than 2009's. Even allowing for the holiday, overall applications were down 2.9 percent on the previous seven days. And--incredibly--the Refinance Index was also down 2.9 percent week-on-week.
Of course, millions of Americans can't refinance no matter how much they'd like to. Some are unemployed while others have newly dismal credit scores. And Investor's Business Daily reports that nearly a quarter of all homeowners are "underwater", meaning that the market value of their property is lower than the balance outstanding on their mortgage.
Even so, many might find it extraordinary that so few are taking up refinancing opportunities. Perhaps some can't be bothered to go through the hassle for (to use Frank Nothaft's figures) savings of $1,500 a year on a $200,000 mortgage. But those annual sums add up. According to the shoprate.com mortgage calculator, someone refinancing that home loan at today's best mortgage rates from a one-percent higher rate would save $44,162 over the life of a 30-year FRM. Invest that in a pension fund, and imagine how much more comfortable your retirement could be.
And, given that some mortgage rate monitoring companies are saying that their figures already show rates inching up, the window of opportunity for refinancing with those sorts of savings may be brief.
Home Refinance Now?
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