After Falling Mortgage Rates Hold Steady

After falling from 5.59 to 5.38 the previous week it looks like mortgage rates for the most part held steady this week. Of the four major mortgage products two fell and two rose. But for all four the movement was minimal. Thirty year mortgage rates rose from 5.38 to 5.42 and the 5 year arm rose from 4.97 to 4.99. The 15 year rate dropped slightly from 4.89 to 4.87 and the 1 year arm fell from 4.95 to 4.93. Below are rates for the last few weeks.

Jun 25, 2009
30-yr 5.42 15-yr 4.87 5-yr ARM 4.99 1-yr ARM 4.93

Jun 18, 2009
30-yr 5.38 15-yr 4.89 5-yr ARM 4.97 1-yr ARM 4.95

Jun 11, 2009
30-yr 5.59 15-yr 5.06 5-yr ARM 5.17 1-yr ARM 5.04

Jun 04, 2009
30-yr 5.29 15-yr 4.79 5-yr ARM 4.85 1-yr ARM 4.81

May 28, 2009
30-yr 4.91 15-yr 4.53 5-yr ARM 4.82 1-yr ARM 4.69

Dec 24, 2008
30-yr 5.14 15-yr 4.91 5-yr ARM 5.49 1-yr ARM 4.95

So while the 30 year rate has dropped from its recent peak of 5.59 on June 11, 2009 we are still up from the extremely low rates we saw in May. One interesting thing to note is that in the last 6 months 30 year rates have increased from 5.14 to 5.42. On the other hand 5 year arms have dropped from 5.49 to 4.99. Even with these changes I would still look for fixed rates over arms. There is a good chance that rates could be much higher in a year or 5 years when the arms would expire.

In addition to rates we also like to look at actual mortgage payments. Using our mortgage calculator we took rates from this week and converted them into a mortgage payment on 200k loan. We also did the same thing with rates from June 18th and from December 24th (6 months ago).

Jun 25
30-yr $1125.55
15-yr $1568.07
5-yr ARM $1072.42
1-yr ARM $1065.1

Jun 18
30-yr $1120.56
15-yr $1570.15
5-yr ARM $1069.97
1-yr ARM $1067.53

Dec 24
30-yr $1090.82
15-yr $1572.22
5-yr ARM $1134.32
1-yr ARM $1067.53

So as we can see the movement in the last week is minimal. Compared to 3 months ago a mortgage payment today would be $34.73 higher or 3.18 percent. Even though mortgage rates are higher than what they were before current rates are still low by historical terms.

Mortgage rates only provide part of the picture for how the lending environment is affecting the real estate market. The other part is that lenders remain very strict in their policies on when they will give out loans. So lenders are offering loans with low mortgage rates but they are not offering them to everyone.

This of course is having a serious dampening effect on the real estate markets potential recovery. Freddie Mac is particular is enforcing a number of new rules. While the government has spent significant resources on keeping mortgage rates low and easier and more effective method to help the real estate market would be to look through Freddie Mac's loan restrictions.

Ki is a realtor in Austin Texas. His site is a resource on Austin Texas real estate. It also provides a mortgage widget along with mortgage calculator code