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Will Mortgage Interest Rates Drop?

September 15, 2011

in Mortgage Interest Rates | Tagged ,

It’s a great time to be shopping for a home. There’s an abundant supply of products to choose from, and unbelievable mortgage interest rates that keep slipping, making potential homeowners smile. According to mortgage giant Freddie Mac, for the week ended Sept. 8, the average 30-year-fixed-rate mortgage dropped to 4.12 percent, the lowest in the organization’s recorded history. The 15-year-fixed rate slipped to an average of 3.33 percent. Yes, we are making history with those incredible interest rates that keep dropping because of a sluggish global and home economy.

“With rates this low there are a lot of homeowners who can save money,” said Brian Mitchell, Sales Manager with Gateway Bank Mortgage, a North Carolina mortgage company in a press release. “Some of our clients who may have just purchased a home six months ago are surprised to learn they could already benefit from a refinance, but when rates are this low it makes sense for everyone to run the numbers.”

Will mortgage interest rates drop further, making these sweet deals even sweeter? Or is this as good as it gets? The economy is still in the dumps and consumers are still wary. Anxious about the depressing job market and spiraling home prices, many are holding off from investing their life’s savings into a dream home. Quite a few are waiting for mortgage interest rates to drop even further in order to get the deal of a lifetime. But, how long should one wait? A survey by found 31 percent of experts surveyed believed that rates will climb in the near future. An equal percentage of panelists believed they would continue to slide, while 38 percent believed that rates will remain unchanged. Polyana da Costa, mortgage reporter at the website believes that President Barack Obama’s job speech will give investor confidence a boost, thereby lifting mortgage rates in the next week. But, we don’t know which way the pendulum will shift if a divisive Congress gives it a thumbs down. David Kuiper, a mortgage planner with First Place Bank, told that “the prudent approach would be to make an informed decision and lock in to secure these low levels, as the market continues to be volatile and impossible to time perfectly.”

True that. You don’t want to keep waiting and regret later if the rates suddenly make an upward climb. But there are factors to be considered. The economy is schizophrenic still. Just this week, a Census Bureau report said that the poverty rose to a historic high of  46.2 million, with nearly one in six Americans qualifying as the definition of poor. The report also found that the real median household in the U.S. declined 2.3 percent to $49,445 in 2010. Those are definitely not happy numbers when everyone wants consumer confidence to trend upward, so that people would start buying again. Under these circumstances, when the industry and policy makers seem to be obsessing about improving the housing market conditions, it seems unlikely that mortgage interest rates will go anywhere but down.

“We are in the Delta Quadrant, the Twilight Zone or whatever expression is currently hip. With the 10-year yield closing below 2 percent and the techs showing a line to 1.5 percent (I find it hard to believe that we will get to 1.5 percent but accept that we will get to 1.75 percent), the question will be just how valuable mortgage debt will seem relative to Treasuries,” said Dick Lepre, senior Loan Officer with RPM Mortgage, San Francisco to With Fannie Mae/Freddie Mac debt backed by the Treasury, mortgage interest rates should drop further, Lepre said. Consumers have lost confidence in the economy or in the ability of a fiscal or monetary policy to correct the mess, he said.

Colin Robertson, a writer for, says there probably isn’t much more rates can do to improve. Robertson cites the driver of rates – the 10-year bond yield, which happens to be at a record low of 2 percent. “It’s rock bottom, at least, historically, so chances are it doesn’t get any better,” he said. Most banks and corporations are much better positioned now than they were when the mortgage crisis first struck, Robertson said. Although news continues to sporadically send shock waves to the economy, things can’t get worse than they already are, some analysts believe. Robertson says that “mortgage rates on the popular 30-year may flirt with the 3 percent range, but likely won’t do much more than that.”

6 responses to “Will Mortgage Interest Rates Drop?”

  1. Orval Glymph says:

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  2. Meryl Granieri says:

    Investing is always a challege no matter how much help you find online. Personally I see it as an art, you are either an artist at it and it comes easy or you struggle all you life with it.

  3. Tina Smith says:

    What is the outlook for the decline in value of homes? Does anyone have any information on this.

    • susanu says:

      The outlook for decline in home value really depends on what area the home is in. However, the experts are commenting or predicting that an overall rise in home values won’t happen until after 2012. However, there will always be pockets of homes that decline more than others. Watch our “This Week in Real Estate” category for updates. We summarize all the real estate news for the week and it usually includes comments on house values.

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