4.25% 30 Year Fixed Rate
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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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Housing Market Hits New Lows

Low interest rates throughout the economy continue to have a major effect in the mortgage market. Low mortgage rates have continued to surprise forecasters by going even lower, past their expected bottoms. Mortgage rates have fallen in tandem with a continued decline in home prices in the United States. Current mortgage rates are dismal, with 30-year fixed-rate loans at 4.07 percent and 15-year loans at 3.31 percent as of September 11, 2011. Home prices are not much better. While the Case-Shiller Home Price Index did show a rise in the second quarter, the index is still down by a severe amount year-over-year.

The previous week reveals that this week’s rates fell. The Primary Mortgage Market Survey, conducted by the Federal Home Loan Mortgage Corporation (Freddie Mac), reveals weekly mortgage rates. According to the latest results, the week ending September 8 saw average rates of 4.12 percent for the 30-year loan and 3.33 percent for the 15-year loan. The 30-year loan declined by 5 basis points or 0.5 percent, and the 15-year declined by 2 basis points or 0.2 percent. A low-rate environment puts downward pressure on current mortgage rates. The Federal Reserve’s zero interest rate policy (ZIRP) is doing little to shore up the housing and mortgage markets.

From a buyer’s perspective, the current market offers the best mortgage rates seen in generations. The National Bureau of Economic Research released data last month that measured Federal Housing Administration loans. The data indicate that borrowing costs are the lowest since the 1950s. With ZIRP ensconced at the Federal Reserve for an additional two years, mortgage rates will stay low for that time frame. Next week, mortgage rates could hit new record lows, putting the next two years in the history books for low mortgage rates. Buyers are not taking the bait.

Being tempted by the best mortgage rates in decades is not enough to entice buyers into a losing market. Negative equity prevails over a disturbingly large segment of the housing market. ZIRP is keeping yields on government debt low, which puts additional downward pressure on mortgage rates. Borrowers can refinance their loans, resetting the amortization schedule for the benefit of a lower monthly payment. Borrowers who hold adjustable-rate mortgages are not so lucky. They have to deal with the risk of rising rates in the future. Two more years of ZIRP probably will not restart the housing market, even with mortgage rates so low.