Mortgage Rates Start June Under 5%

June 02nd, 2010

Mortgage rates continue to favor those seeking refinance mortgages to lower monthly mortgage payments, consolidate debt or get on track to an early pay-off of their mortgage to become mortgage free. Also benefiting from the current historically low mortgage rates are those looking to purchase a new home as low mortgage rates increase home affordability. In its latest Primary Mortgage Market Survey, Freddie Mac reports the average conventional mortgage rate for a 30 year fixed rate mortgage at a cost of 0.70 origination points was 4.78% for the week ending May 28, 2010. If you have been using free mortgage calculators to determine whether to initiate an application for a refinance mortgage, or to enter the market for a new home, the current rates available are the lowest since early December 2009–when they were at their lowest in the past thirty plus years.

Low Mortgage Rates Increase Savings

Using a refinance calculator during the month of May you have seen the average rate drop from 5.06% at the end of April to the current rate of 4.78%, a savings of approximately $34 per month for a $200,000 mortgage. If you are considering a mortgage refinance to consolidate debt the additional savings from the quarter percent drop in mortgage rates in May further increases your monthly savings and debt relief. Using an early payoff calculator you can see that the May mortgage rate drop can drop two years off your mortgage just using the savings from the rate drop alone.

If you have been considering a mortgage refinance to lower your monthly mortgage payment, consolidate debt to improve monthly cash flow and debt payment relief, or reduce the term of your mortgage to save tens, possibly hundreds, of thousands of dollars paying off your mortgage, the current historic mortgage rates should have you starting your refinance mortgage application.

Current Mortgage Rates Increase Affordability

Are you among the many families that have watched the combination of dropping home prices and mortgage rates bring home affordability into your family’s future? With a pre-qualification calculator you can see that from the beginning to end of May the drop in mortgage rates have increased your purchasing power, with the same monthly mortgage payment the amount of a home you can purchase has increased 2% or more. With tightening credit standards from mortgage lenders increased home affordability increases the opportunity for your family to purchase a new home due to lower mortgage rates.

Current Mortgage Rates in Historical Context

May is the third month in 2010 that mortgage rates have averaged under 5% for the entire month. In all of 2009 the average monthly mortgage rate reported by Freddie Mac was under 5% only five times, the first year since the survey started in 1971 that any monthly mortgage rate average was under 5%. How long and how often does history repeat or better itself? That is the question as you look at the current mortgage rates and determine if you can do a little better by waiting for even lower rates that may never come.

For those who waited for a better rate for their refinance than the market low at the beginning of December the past five months of waiting has cost them a lot of money. If you were considering a refinance in early December that was going to save you $200 per month, you have lost $1000 in savings by keeping your current mortgage since December. With the rates today incrementally lower than early December you may never recoup those lost savings.

Historic opportunities do not present themselves to us very often, which is why they are historic and not routine. We never know where and when the bottom of the market is until it has passed, long passed, so whether our current mortgage rates are at the bottom of this cycle or not we do not know. What we do know is you have a great opportunity to increase your savings with a mortgage refinance or enjoy increased affordability with the fantastic mortgage rates now available.

Posted By :
Dennis C. Smith is co-owner and broker of record for Stratis Financial in southern California. He has over twenty years' experience in the mortgage industry.

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