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Mortgage Rates Continue to Fall

Potential homeowners have been watching the housing market with great interest over the past several years, one of the most unique periods in real estate history. Since the collapse of the housing bubble, home prices have fallen nearly 30 percent. In addition, many economists expect housing prices to fall even further over the next year.

As prices have fallen, demand for housing has become weaker as potential homeowners do not wish to buy into a falling market. Banks and other lending institutions have become very reluctant to loan money as they are seeking to raise capital to shore up their own balance sheets.

Given the importance to the housing market to the overall economy, the Federal Reserve has dropped interest rates to historic lows. Investors have also poured money into U.S. Treasuries, which they see as a safe asset in these turbulent times, driving down interest rates even further.

As interest rates have fallen, mortgage rates have fallen to levels never seen before. Indeed, mortgage rates for 30-year fixed rate loans recently fell to below four percent after the Federal Reserve announced the beginning of “Operation Twist,” an action designed to lower long-term interest rates.

As potential home buyers follow these developments, the one question they have on their minds is the following: will mortgage rates continue to fall? Given the falling levels of mortgage rates, many people looking to borrow money for a home have concluded that rates can not get any lower.

However, people have been thinking in these same terms for many months now. Given the growing deficits of the federal government and the credit rating downgrade by Standard and Poor’s, many housing experts believed that interest rates had nowhere to go but up.

However, the Federal Reserve has remained committed to keeping interest rates as low as possible. The central bankers fear that rising interest rates will stall any potential growth in the economy. As such, it is quite likely that interest rates will remain low into the foreseeable future.

So will mortgage rates continue to fall? Given this forecast, it is entirely possible that rates will either remain steady or continue to fall, at least for the short-term. Of course, given how low such rates have already become, further declines will be increasingly small. For people who are giving serious consideration to buying a home, they may wish to start shopping around for a loan.