Mortgage Rates Continue to Drop

Due to the falling mortgage rates, now might be the best time to purchase a home if you qualify for a loan.

According to The Wall Street Journal, mortgage rates fell again last week, marking the third week of declining rates in a row. In addition to dropping for three consecutive weeks, this new decline also marks the first time in awhile that mortgage rates drop below five percent. Currently, the rates are at 4.99 percent for the week that ended on Thursday, January 21.

The week before, the average rate for a 30-year fixed rate mortgage stood at about 5.06 percent, which is a drop from a year ago when the average rates stood at about 5.12 percent. Mortgage rates for 15-year fixed rate mortgages are even lower than that. The current rates as of last week are 4.4 percent which is a drop from 4.45 percent from the previous week and 4.8 percent from last year.

Mortgage rates for adjustable-rate mortgages are also down. As of the end of last week, rates stand at about 4.27 percent. The previous week, the rates were 4.32 percent which is nearly a one percent drop from last year's 5.24 percent.

Those in the mortgage industry are hoping that the lower interest rates will lead to a boost in home sales. With a flailing housing market, lower mortgage rates may just be one of the signs of a revival in the mortgage industry and in the economy as a whole. When money is cheaper to borrow, people are more likely to borrow it. In the last week alone, the mortgage industry saw a nine percent increase in mortgage applications. This could just be wishful thinking but it could also mean the start of something that could have a snowball effect and help our economy.

According to Daniel Penrod, a senior analyst at the California Credit Union League in Ontario, California, the lowered rates are what is "really keeping the mortgage industry afloat right now." The majority of the people who are applying for those new mortgages last week were first-time homebuyers who have been waiting for the mortgage rates to drop so they can take advantage of them. As a result, most of the demand is in the lower-end homes.

The increase in mortgage applications is also a signal that consumers may be slowly increasing their confidence in the economy overall. In addition to that, many current homeowners are applying to refinance their homes as the high unemployment rate has managed to keep many potential home buyers away from trying to purchase a home.

The good news is that you still have time to claim that tax credit while taking advantage of these low mortgage rates. The federal government is offering an $8,000 tax credit to first-time home buyers and a $6,500 credit to experienced home buyers who purchase new homes before the end of April. With all of this going on, it would surely be a great time to apply for a mortgage loan while rates are low and tax credits are high.