It’s a Secret… Mortgage Rates are Down

Lost in all the negative news about real estate and the on again off again talk about recession (mostly on again lately) is the fact that mortgage rates are down… a lot. As I have written about on numerous occasions, long term mortgage rates are not generally directly effected by Fed rate cuts. Long term mortgage rates are more closely tied to long term bonds and treasury securities. It is the long term outlook for inflation, and the strength of the economy that has the greatest impact on long term mortgage rates. Here is the latest interest rate graph, which clearly shows both conventional (loans up to $417,000) and jumbo 30 year fixed rate mortgages in California. As you can see, both conventional and jumbo rates have trended down significantly, especially the conventional mortgage rates which are well under 6%. Jumbo loans are down as well, though not as much as conventional rates. (click on graph to enlarge)

This is great news for buyers, and helps make homes, especially entry level homes, more affordable. With prices down, and uncertainty rampant, buyers are finding excellent opportunities in today’s market. Indeed, a home will cost you less today than it would have even a year ago.

For short term fixed loans (3 year to 7 year fixed rate loans), rates are down even more sharply. This is to be expected, as short term fixed rate loans are directly impacted by moves in short term interest rates, and the Fed has continued to lower short term rates to stimulate the economy and try to avoid a recession. The graph below shows Jumbo 3 and 7 year interest only loans in California. As you can see, they are down sharply. (click on graph to enlarge)

While inflation jumped in December, mainly due to spikes in the cost of energy, it is the threat of recession which is driving the lower rates. If you pay attention, there are some tremendous buying opportunities in the market right now.