Update on the latest average mortgage rates from Freddie Mac & the Mortgage Bankers Association for 9-15-2012. Plus QE3 and what it means for mortgage rates…
Mortgage rates are getting better. Like crazy almost too hard to resist better. And with the news about QE3 this week, many people are going to be curious about whether or not mortgage rates are going to drop. So let’s look at the average mortgage rates reported by Freddie and the Mortgage Bankers Association this week:
The Mortgage Bankers Association Reported:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.75% from 3.78%, with points increasing to 0.44 from 0.37 (including the origination fee) for 80% loan-to-value ratio (LTV) loans.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $417,500) decreased to 4.00% from 4.05%, with points decreasing to 0.30 from 0.32 (including the origination fee) for 80% LTV loans.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA decreased to 3.50% from 3.54%, with points decreasing to 0.43 from 0.44 (including the origination fee) for 80% LTV loans. This 30-year FHA contract rate marks a new low for the survey.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.07% from 3.10%, with points increasing to 0.38 from 0.37 (including the origination fee) for 80% LTV loans.
Freddie Mac Reported:
- 30-year fixed rate mortgages averaged 3.55% with an average 0.6 point
- This is the same as last week.
- Last year at this time, 30-year fixed rate mortgages averaged 4.09%
- 15-year fixed rate mortgages this week averaged 2.85% with an average 0.6 point
- This is down from last week when it averaged 2.86%
- A year ago at this time, the 15-year fixed rate mortgage averaged 3.30%
QE3 and Mortgage Rates
On Thursday the Federal Reserve announced QE3. That stands for Quantitative Easing 3, which is the 3rd attempt by the Fed to stimulate the economy. Or funnel more money to the banks & Wall Street from the US tax payers. Just depends on now you look at it or what flavor Kool Aid you are drinking…
Anyway, part of QE3 is that the Fed is going to buy $40 billion dollars of mortgage bonds every month. Which should put downward pressure on mortgage rates. Right after the Fed’s announcement, mortgage rates fell and the stock market rose to levels we haven’t seen since 2007. Which sounds great…
The Fed thinks that getting mortgage rates lower will get more people to buy homes. Which would help unemployment and stimulate the economy. But if rates are already super super low, do you think that rates dropping more is going to get people to buy a home?
And here is the kicker: The Federal Reserve doesn’t set mortgage rates. Just because the Fed Funds Rate rises or falls does not mean that mortgage rates will do the same thing. So there’s no telling whether mortgage rates will fall with 100% certainty.
However, most people think mortgage rates will fall slightly, myself included.
But the banks may decide they are NOT going to reduce mortgage rates as much as they could. Why? Because if they keep mortgage the rates higher, then the banks make more money when they sell the mortgages in the bond market. Also if private investors sell mortgage-backed securities at a faster rate than the Fed is purchasing them, mortgage rates would go up!
The Take Away:
Whether or not QE3 makes rates drop more does not amount to a hill of beans if people do not buy homes. Mortgage rates and prices are making home ownership more affordable than just a few years ago. We have to consider the fact that despite low mortgage rates and great prices, some people are scared to buy a home. Also the stricter lending requirements means that some people can NOT take advantage of this historic home buying opportunity.
Damn shame that some people are missing out on the deals available today.
The only way to find out IF you can buy a home is to start the process off by taking the first step.
And that first step is talking to a lender. Always has been, always will be.
Let me remind you that these are the average mortgage rates and you may get a better rate OR you might have to pay more. Plus there is much more to getting the best deal on a mortgage besides just the mortgage rates. A good mortgage professional will try to get you the best deal, which includes looking at many other things besides just the interest rate! Also a good mortgage professional can advise you about what you need to work on IF you cannot buy a home today.
As always, I am providing this to you for informational purposes only! I am not a mortgage lender and you should contact the lender of your choice directly to learn more about its mortgage products and your eligibility for such products.