A noteworthy week for mortgages

October 04th, 2012

In a year already marked by record low mortgage rates, the drop in rates during the last week of September was especially noteworthy.

As rates change quickly, so do assumptions about mortgage payments and home affordability. Certainly, any time there is a drop in rates as significant as what happened in late September, it is worth checking a mortgage calculator to see what your home buying or refinancing opportunities are.

A noteworthy drop in mortgage rates

Falling mortgage rates may seem like old news by now, but what happened at the end of September was noteworthy for two reasons:

  1. Mortgage rates dropped by 9 basis points in just one week. This was the steepest weekly drop in rates since early April.
  2. Mortgage rates reached a new record low. Rates actually had turned upward in August, and it looked for a while there as if they might finally have hit bottom. In September, they resumed their downward course -- and then some. By September 27, they had reached 3.40 percent, the lowest level on record.

This is where mortgage calculators come into the picture. If you think you've already taken a look at the mortgage market, keep in mind that conditions have been changing unusually quickly. Using a mortgage calculator is a quick and convenient way to check your assumptions. And given the latest drop in rates, there might be some good news waiting for you.

More on the way?

Both history and logic dictate that mortgage rates shouldn't go much lower. And yet…

On the same day that mortgage rates hit their record low of 3.40 percent, the Bureau of Economic Analysis announced that economic growth in the second quarter had been even slower than previously thought. They revised their estimate of real GDP to a 1.3 percent annual growth rate, down from 1.7 percent.

Slow growth facilitates low mortgage rates in two ways. First of all, it encourages the Federal Reserve to continue its stimulative policies, which include market intervention to drive mortgage rates lower. Second, it eases inflation pressures, which clears the way for mortgage companies to continue to offer low rates.

So while it may not seem that mortgage rates could possibly go any lower, stay tuned -- and keep checking those assumptions.

Posted By :

Richard Barrington has earned the CFA designation and is a 20-year veteran of the financial industry, including having previously served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. Richard has written extensively on investment and personal finance topics.

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