30-Year Mortgage Rates Drop Below 4%

I joked around 3 years ago that ultimately Ben Bernanke would push mortgage rates down to the 3% range – that was a tongue in cheek comment.  Lo and behold, it truly has happened.  Probably as amazing, is historically low rates all year the “housing rebound” bulls have been speaking of for 3 years, has yet to materialize.  I contend we are still years away.  That said, all this refinancing (for those who can) is extremely beneficial to cash flows.

  • Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate being offered in January 2010. Refinancing the loan at 3.94 percent could save him or her more than $2,000 a year.  But many homeowners with good jobs and stable finances have already refinanced over the past year.

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  • The average rate on the 30-year fixed mortgage fell to 3.94 percent this week, the lowest rate ever. For those who can qualify, it’s an extraordinary opportunity to buy or refinance.
  • Mortgage rates could fall even further now that the Federal Reserve plans to reshuffle its portfolio of securities to try and lower long-term rates.
  • On Thursday, Freddie Mac said the average rate on a 30-year fixed mortgage dropped from 4.01 percent last week, the previous low. The average rate on a 15-year fixed loan, a popular refinancing option, dipped to 3.26 percent, also a record.
  • Still, rates have been near historic lows for more than a year and have done little to boost home sales. Many people don’t have enough cash or home equity to get a loan, or they are reluctant to take the risk in this market.
  • This year is shaping up to be among the worst for sales of previously occupied homes in 14 years.

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Considering the drop in rates, yesterday’s data in purchases and refinances is (to over use the word) amazing.  One would think refinance activity (if not purchasing) would be flying.

  • The MBA said overall mortgage application volume was down by a seasonally adjusted 4.3% from the prior week.  Refinance applications were down by 5.2% from the prior week, while home-purchase apps were down by 0.8%, according to the MBA.

Also we haven’t heard anything in the past month about the program floated to refinance every American with a government backed loan to these new rates. Hmm…

About Mark Hanna 543 Articles

Affiliation: Hanna Capital, LLC

Mark Hanna is President and Owner of Hanna Capital, LLC, a registered investment advisory firm. Mark has been a follower of markets since the late 80s, with a focus on individual equities since the mid 90s. He has been a well known commentator in the financial blogosphere for the past 5 years, following a career in corpoporate finance and accounting. Mark attended the University of Michigan where he graduated with a degree in Economics.

As an avid reader, Market Montage is the personal blogging site for Mark to share his views on economics, markets, and the like. Occasional cynicism and wit shall be deployed in his postings.

Follow Mark on Twitter @fundmyfund.

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