4.25% 30 Year Fixed Rate
Loan Amount
Loan Type

Program Rate APR
30-Yr fixed 4.750 % 0.7 to 1
15-Yr fixed 3.750 % 0.7 to 1
5/1 ARM 3.125 % 0.7 to 1
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FHA Mortgage Rates Continue on a Downward Trend

FHA mortgage rates have continued on a downward trend. The decrease in the 30-year fixed FHA mortgage rates was the most pronounced, as rates dropped from a national average of 4.33% to 3.97%. This drop of 0.36% was not only significant for being such a large weekly drop, but also for the fact that the rate dropped below 4%. Rates below 4% on 30 year fixed loans are the lowest rates that have been offered in decades, making them good mortgage rates.

The rate on the 15 yr fixed loan dropped from 3.62% to 3.42%. The 5/1 ARM rate dropped from 3.37% to 2.92%. From a historical perspective, these are very good mortgage rates. Since the national average rate for mortgages started being tracked several decades ago, rates have not been this low.

Several factors have converged to bring mortgage rates to these historic lows. The lack of demand in the housing market has brought down demand for mortgages, forcing banks to lower their rates in order to attract new customers. More recently, the uncertainty in the European debt markets, particularly the Greek debt market, has caused investors all over the world to rush to other investments.

This increase in demand from investors who want to buy mortgage debt has essentially made it cheaper for banks to borrow the money that they are offering as mortgage loans. Additionally, the returns on 10 year Treasury notes, where many American banks have traditionally stored their capital, have dipped down to practically zero in the past week. This is giving banks motivation to lend out the money instead of hold on to it.

Where mortgage rates will head next week will be dependent on a variety of factors. At the present time, however, it is believed that the main factors will be the action of Greece regarding their debt. The decision of the Greek prime minister to allow his people to vote on the bailout deal recently reached with the Eurozone has caused many investors to believe that Greece will fall into bankruptcy. This will cause more investors to rush into other investments, further decreasing mortgage rates. Of course, this is only the educated guess of economists.