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Mortgage Rates Fall Again
Rates on 30-year-fixed mortgages have fallen again, declining along with bond yields amid easing concerns over inflation due to the still-slowing economy, Freddie Mac said last week.
The average rate on a 30-year fixed mortgage dropped to 5.04 percent last week from 5.16 percent the previous week. A year ago, the 30-year, fixed-rate mortgage averaged 6.04 percent.
Average rates for 30-year-fixed mortgages hit a record low of 4.96 percent a month ago, a decline attributed to the Federal Reserve’s move to buy $500 billion in mortgage-backed securities to spur lending by banks.
The average rate on a 15-year fixed-rate mortgage was 4.68 percent last week, down from 4.81 percent the previous week, Freddie Mac said. The rate stood at 5.64 percent a year ago.
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Rates and/or fees change on a daily basis depending on what the macro economic environment does. Bad economic news will generally cause money to flow out of the higher risk stock market and into safer, fixed income investments such as treasury bonds, corporate bonds and mortgage backed securities (MSB’s). Money flowing into these investments drives their price up (remember supply and demand?) and this increase in price causes the yield that the fixed rate investment (bonds or MSB’s) are paying to go down, thus causing interest rates to decrease. How do you predict where rates are going? You don’t. How can anyone predict the future? The reality of this market is that prices are down, inventory is up, rates are phenomenal, and it is a GREAT time to buy. Throw in up to $8,000 in tax credits, why wouldn’t you buy? It’s true lending guidelines have tighten up, but banks have PLENTY of money to lend.
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