As Mortgage Rates Fall, the Refi Party Continues

Mortgage Rates Fall

Mortgage rates on the most common type of mortgage fell to a new low this week, as investors try to digest what’s in store for the fragile global economy.

European debt crisis and growing concerns about the housing market in the United States should keep mortgage rates quiet for the foreseeable future.

The benchmark 30-year fixed-rate mortgage fell 5 basis points this week to 4.19%, according to a national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgage rates in this week’s survey had an average total of 0.32 discount and origination points. One year ago, the mortgage index was 5%; four weeks ago, it was 4.24%.

This is the lowest level the 30-year fixed mortgage rates have reached in the 26-year history of the weekly survey.   Mortgages should be flying out the doors of Lenders but home purchases are still weak in many parts of the country and refinance activity is modest.

Euro crisis

The debt crisis in Europe is a ticking bomb that has been scaring investors and keeping mortgage rates low for several weeks now. If that bomb goes off and the euro ceases to exist, the global economy would take a big hit and there would be no room for mortgage rates to rise anytime soon, mortgage experts say.

Right now Investors are nervous.   Everyone is hoping (that European leaders) will come to an agreement, but it’s difficult to get 20 countries to agree on an issue.   Here in the US we can’t seem to get our two parties in congress to agree on simple issues.

Home Sales Worse Than Many Had Thought

Meanwhile, in the United States we struggle with our own economic issues. The latest news to inject more fear in the markets came from the National Association of Realtors. The organization said Tuesday that sales of previously owned homes in the United States are weaker than it previously reported.

NAR says home sales since 2007 will be revised downward because a review of its data shows some properties were listed more than once when the numbers were calculated. The revised numbers will not affect figures on home prices and will be released next week. In short, home sales activity may be much weaker than many investors had thought.

Fed Helping Keep Rates Low

The Fed has done everything in its power to keep mortgage rates low in recent months, and many experts say it will continue to do so until the housing market and economy begin to strengthen.

After the Federal Open Market Committee met on Tuesday, the Fed says that “to support a stronger economy,” it will continue to reinvest short-term securities into long-term securities to help long-term rates. And it will keep reinvesting in mortgage-backed securities.

When in Doubt, Lock

There’s no question that economic uncertainties and the Fed will contribute to holding rates low for a while .  But there’s also no guarantee rates won’t suddenly spike.  That’s why borrower should generally lock their loan at the application stage.  Markets can be very volatile and it’s better to get a rate that you expected than to hope for something lower and have it spike upwards on you.  That extra ½% lower can evaporate quickly if the market move the wrong way and being greedy can end up costing you.