Mortgage Rates Fall Again : Lowest Point Since May

Mortgage rates fell again this week reaching a 3 month low. The 30 year mortgage rate is now lower than it was 6 months ago. It's interesting to note that rates are lower than they were ago months ago. Six months ago the rates were more newsworthy because at the time they were all time lows. Since rates dropped in April today's rates are only at 3 month lows. The all time low of 4.78 was reached in April 2009.

The question remains though why rates are dropping. The expectation has been that rates are going to rise eventually. Yet for the last 3 weeks 30 year rates have dropped from 5.29 to 5.08. The other major mortgage products all fell as well this week. Below are rates for the last few weeks. We also took rates from this week and August 27 and January 29th and translated them into a mortgage payment for a 200k loan.

Sep 03, 2009
30-yr 5.08 15-yr 4.54 5-yr ARM 4.59 1-yr ARM 4.62

Aug 27, 2009
30-yr 5.14 15-yr 4.58 5-yr ARM 4.67 1-yr ARM 4.69

Aug 20, 2009
30-yr 5.12 15-yr 4.56 5-yr ARM 4.57 1-yr ARM 4.69

Aug 13, 2009
30-yr 5.29 15-yr 4.68 5-yr ARM 4.75 1-yr ARM 4.72

Aug 06, 2009
30-yr 5.22 15-yr 4.63 5-yr ARM 4.73 1-yr ARM 4.78

Jan 29, 2009
30-yr 5.10 15-yr 4.80 5-yr ARM 5.27 1-yr ARM 4.90

Mortgage Payments (for a 200k loan)

Sep 03
30-yr $1083.44
15-yr $1534.07
5-yr ARM $1024.09
1-yr ARM $1027.68

Aug 27
30-yr $1090.82
15-yr $1538.17
5-yr ARM $1033.67
1-yr ARM $1036.07

Jan 29
30-yr $1085.89
15-yr $1560.82
5-yr ARM $1106.88
1-yr ARM $1061.45

The low rates combined with various tax credits have led to an up tick in real estate sales this summer. Of course the question remains how long mortgage rates can stay this low. With the massive amount of spending in the last year by the federal government the expectation is that at some point inflation is going to come home to roost. And without inflation the national deficit poses a significant problem. So on one hand the government has said they are watching inflation to make sure it does not rise to high. But on the other hand without inflation or national deficit poses a greater risk. So inflation should come in one form or another and once this occurs rates should rise along with inflation.

We are seeing some evidence that banks are easing restrictions on residential lending possibly because they are thinking the worst is now behind us. But we are only seeing credit loosing from some banks. Additionally, it's only for residential lending. Banks have grown much more restrictive with commercial lending to the point that it looks like banks want to exit the commercial market as quickly as possible.

So a few questions remain, while we expect rates to increase over the next 6 months, what's going to happen between now and then? This question doesn't have an easy answer. My expectation is that as long as the economy stays weak rates should stay low. They might go down a little or rise a little but I seeing them bouncing around between 4.75 and 5.00.

If people are looking to buy a house my advice would be to move now instead of wait. While I think rates are going to stay down for awhile if the economy's recovery starts to move along more rapidly we could see a rapid rise in mortgage rates.

Ki organized a website focusing on Austin Tx real estate with a search of Austin area homes. His site also has a graph of historical interest rates along with a mortgage widget. It also has a blog with up to date information on the Austin real estate market.