For all of the talk of the US government defaulting on its debt and rising inflation, mortgage rates have remained exceptionally low. Both the Treasury and mortgage markets do not look convinced of any future default or sharp rise in inflation.
This week, according to BestCashCow data, the average 30 year conforming mortgage rate slipped below 5% while the average 15-year FRM was 4.24 percent down from 4.28 percent last week.
I like to also look at real rates, not just averages. I've been following actual rates, not just averages for a 30-year fixed rate loan in Massachusetts with 0 points ($200,000 loan) for the past year. Last August the best rate was 4.460% with 0 points and $1,995 in fees. It's now 4.789% APY. So rates have risen from their lows last summer, but not by much. It's still a golden period for homeowners in terms of financing a home.
This fits in squarely with what is happening with Treasuries. As I wrote before, the Treasury market is showing little indication of long-term inflation concerns. The Wall Stree Journal jumped on this bandwagon yesterday with an article entitled Inflation? Numbers Show Faith in Fed. The bottom line is that while the pundits are shouting about inflation and default, the markets, where people back up their convictions with money, are showing very fear of either at the moment.
That means that from a macro standpoint, mortgage rates could stay low for some time to come. Mortgage rates though are not just set by inflation numbers. Rates are also dependent on what happens to Fannie Mae and Freddie Mac and whether the government shuts them down and privatizes them. Mortgage rates right now are subsidized by the backing of the US government. If that backing disappears, rates will rise, although by how much is unclear.
So, with housing prices down and mortgage rates near record lows, it's never been a better time to be looking to buy.
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