Mortgage Rates Continue in Unchartered Territory

Mortgage rates continue to charter unfamiliar waters with seemingly new record lows on a weekly basis.

With the exception of a few blips on the radar over the past 6 months, mortgage rates have continued to stay at, or below, previous all-time record lows, and the stagnant economy is to blame.

Mortgage Rates On An Elevator Down

As one analyst put it recently, “Mortgage rates have been on a one-way elevator to the cellar.”

Mortgage rates have continued to slump in tandem with the U.S. economy. Freddie Mac attributed the rock-bottom rates to two recent economic reports: the anemic payroll growth of 69,000 jobs in May, which pushed the unemployment rate up to 8.2%, and the weaker-than-expected gross domestic product growth of a 1.9% annual rate in the first quarter.

During the first quarter, the MBA estimates that mortgage lenders originated $91 billion in purchase loans — a 14 percent decline from the year before. So far, lenders are on track to originate $97 billion in second quarter purchase loans, which would represent a 12 percent annual drop.

The low mortgage rates are happening as home prices hit new post-bubble lows, according to the S&P/Case-Shiller home price index of 20 major markets. Home prices have not been this low since mid-2002. Yet, tight underwriting standards and fears about the strength of the economic recovery have kept some would-be homebuyers on the fence.

Briefing lawmakers in Washington, D.C. recently, Federal Reserve Chairman Ben Bernanke said the depressed housing market has “been an important drag” on the economic recovery. Bernanke said the Federal Reserve is continuing a program announced last September to lengthen the average maturity of its securities holdings by purchasing $400 billion of longer-term Treasury securities and selling an equal amount of shorter-term Treasury securities.

There undoubtedly has never been a better time to buy a home, if your finances are in order and you can qualify for a mortgage with today’s almost unbelievably low mortgage rates. Talk to us about your options. You may find that you qualify, and you’ve been sitting on the sidelines in fear.