Mortgage Rates Continue to Fall

Mortgage rates continue to fall this week. The 30 year rate fell from 5.32 to 5.20. While this is not lower than the rates we saw a few months ago this is lower than any recorded rate before the start of 2009. The 15 year rate fell as well dropping from 4.69 to 4.63. In the last 5 weeks rates have fallen steadily each week going from 5.59 to 5.14. Below are rates from the last 5 weeks and rates from December 31, 2009 (6 months ago).

Jul 16, 2009
30-yr 5.14 15-yr 4.63 5-yr ARM 4.83 1-yr ARM 4.76

Jul 09, 2009
30-yr 5.20 15-yr 4.69 5-yr ARM 4.82 1-yr ARM 4.82

Jul 02, 2009
30-yr 5.32 15-yr 4.77 5-yr ARM 4.88 1-yr ARM 4.94

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

Dec 31, 2008
30-yr 5.10 15-yr 4.83 5-yr ARM 5.57 1-yr ARM 4.85

So the question remains after rising a few months ago why are rates suddenly falling. Part of it can be attributed to the negative economic news that has been coming out. While the economy is not necessarily getting worse the recovery seems to be moving slower than first thought. The slow recovery has put the breaks (for now) on inflation fears and has probably helped to push down interest rates as well. This is of course good news for the real estate market. The longer rates stay low the better the prospects for the real estate market to get rid of some of the excess inventory that has built up over the last few years.

In addition to rates we like to look at mortgage payments. Using our free mortgage calculator we looked at mortgage payments based on today's rates for a 200k mortgage.

Jul 16
30-yr $1090.82
15-yr $1543.3
5-yr ARM $1052.96
1-yr ARM $1044.5

We also did the same calculation on rates from 5 weeks ago (when rates first started to fall) and rates from the beginning of the year.

Jun 11
30-yr $1146.89
15-yr $1587.84
5-yr ARM $1094.51
1-yr ARM $1078.53

Dec 31
30-yr $1085.89
15-yr $1563.93
5-yr ARM $1144.37
1-yr ARM $1055.38

As we can see the drop in rates over the last few weeks is rather significant. A mortgage payment would be 4.88% less today than it was 5 weeks ago. For a 200k it would be $56.07 cheaper a month.

So what is going to happen in the future? It's hard to tell and I will be the first to admin I was pleasantly caught off guard by the recent drop in rates. While its hard to know what is going to happen in the next few weeks over the next 6 months I would expect rates to rise significantly as the economy starts to recover. Over the next few weeks I would expect there is more of a risk of rates rising than falling simply because rates are incredibly low now.

Ki works as an agent in the Austin market and enjoys spending his free time in the hill country. His site provides information on mortgage rates along with a free mortgage calculator. It also provides extensive information on Austin Tx real estate.