Mortgage Trends This Week: Sept. 21


The mortgage market sure didn’t take its cue from last week’s mostly positive economic news, as mortgage rates ratcheted downward and bond prices advanced, according to the BankingMyWay Weekly Mortgage Rate Tracker.

Even mortgage professionals must be scratching their heads these days. Housing starts showed gains last week, although the disproportionally high number of multi-family homes may have skewed the numbers. In addition, the Philadelphia Federal Reserve posted its second consecutive positive economic index, and jobless claims were down. There’s a growing sense out there now by economists that if you have kept your job, you’ve successfully dodged the recession bullet. Few economists expect companies to continue cutting staff at this point.

Taken together, all of this positive economic news should be driving mortgage prices upward, and the price of houses upward, to boot. But that’s just not happening.

For the week, the BankingMyWay Tracker found that 30-year fixed-rate mortgages fell to 5.15% from 5.22%. Meanwhile, 15-year fixed-rate mortgages slid to 4.66% from 4.785% - that’s the lowest rate range for 15-year mortgages in recorded history, according to Fannie Mae (Stock Quote: FNM) (although the government-supported lender only began tracking 15-year rates in 1991).

On the variable-rate side, adjustable-rate mortgages fell backward, too; with one-year rates falling to 4.6% from 4.99% and three-year rates plummeting to 4.6% from 5.01%. Five-year ARMS backtracked to 4.54% from 4.85% for the week.

For the record, September is shaping up to be a mortgage borrower’s favorite month, as rates have generally slid southward of late. Thirty-year fixed rates are averaging roughly one full percentage point lower than they did a year ago at the same time.

Why the basis for lower mortgage rates? Some economists point to the upward trend in new single-family homes, which recorded positive gains throughout the spring and summer of 2009, with the August number sloughing off only slightly. In addition, a recent National Association of Homebuilders survey shows that confidence in the home construction market is beginning to turn around. These are the professionals who read the markets, estimate market strength and decide whether or not to build more homes. With demand trending upwards, as evidence by the summer-long uptick in new mortgage applications, the homebuilding industry is starting to find its footing once again.

That said, this conflict between good economic news and lowering mortgage rates shouldn’t continue. At some point, rates will bounce back up, especially if the Federal Reserve feels the need to raise interest rates to fend off the inflation that normally accompanies an economic rebound, if that’s what you want to call what we’re experiencing right now.

So why wait? If you’re looking for a new mortgage, the time to act is now.

To kick start your search, check out the best mortgage rates on BankingMyWay’s Mortgage Rate Search Engine.

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