Saturday, November 26, 2011

Mortgage Rates Continue to Slide Closer to 4% Mark

The most recent numbers released by Freddie Mac show that mortgage rates are continuing their fall, ebbing even closer to the four-percent mark that experts say would mark a record-low. The rates began falling three weeks ago, amid fears over the current economic crisis in the United States and across the globe. When the Federal Reserve announced this past week that they planned to keep rates low for the next two years, the idea of even lower mortgage rates was raised as well.

Where are the Rates Now?

As of the close of the week on Thursday, the Freddie Mac survey had a 30-year fixed-rate mortgage loan at just 4.02%, with borrowers paying points equal to about of 0.7% of the original loan amount. A different survey conducted by Credit Suisse found 30-year rates for the past week around 4.16%, with borrowers paying 1% of the loan amount in points. That figure is down from the 4.32% Credit Suisse reported last week.

Mortgage rates are traditionally tied closely to the rates on 10-year U.S. Treasury notes. On Wednesday, the Treasury note hit a low rate of 2.0%, before climbing to 2.03% by the end of the day on Thursday. Credit Suisse is predicting that the same Treasury notes could hit a new low by the end of the year. This drop in Treasury note rates is likely to drive mortgage rates even lower as well.

Treasury Note Spread Higher than Usual

Another interesting trend to note is the fact that the spread between Treasury note rates and home mortgage rates is at its widest level in the past year, with home rates higher than the Treasury note rates. This larger spread may be due to the volatility of the bond markets, according to some financial experts. The other reason might be that banks are cutting back on staff and charging slightly higher rates to keep their volume of work more manageable over the short term. That trend could change relatively quickly, as banks catch up and reduce rates once again.

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