Thursday, May 12, 2011

Slow Economic Recovery Produces Lowest Mortgage Rates

After releasing various reports of economic data this past week, it was evident that the economic recovery is at a slower pace than anticipated which, in turn, produced the lowest mortgage rates so far for this year 2011. Towards the end of the week,'s daily survey of wholesale and direct lenders showed that conforming 30 year fixed mortgage rates had dropped .125% to a new low of 4.375%. 

Remaining the same at last week's lows, 15 year fixed mortgage rates are at 3.750% and 5/1 adjustable mortgage rates are at 3.000%. Conforming fixed rate mortgage loans are popular with borrowers who want the same mortgage payment for the life of the loan. Available with 0.7 to 1% origination fee, these are the lowest mortgage rates for borrowers who have good credit and can obtain lender approval.

FHA 30 year fixed mortgage ratesare at 4.250%, still lower than conforming 30 year fixed mortgage rates. FHA 15 year fixed mortgage rates are at 4.000% and FHA 5/1 adjustable mortgage rates are at 3.375%, both slightly higher than the comparable conforming mortgage rates. FHA mortgage loans are often used by borrowers, especially first time home buyers, who enjoy the benefit of low down payment requirements. Borrowers who have less than perfect credit also turn to FHA for their mortgage needs. In return for these benefits, FHA closing costs (APR) are higher because of various FHA fees and the upfront mortgage insurance premium.

Holding their own, jumbo mortgage rates are still at favorable lows which is a major benefit for high end borrowers. Current jumbo 30 year fixed mortgage rates are at 5.125%, jumbo 15 year fixed mortgage rates are at 4.500% and jumbo 5/1 adjustable rate mortgages are at 3.625%, all remaining the same this past week. Jumbo mortgage loans are necessary for mortgage financing above the conforming loan limit which is $417,000 to $729,250, depending on location of the property. These are the lowest jumbo mortgage rates available with 0.7 to 1% origination fee to borrowers who have maintained outstanding credit.

MBS prices (mortgage backed securities) fluctuated over the past week. Mortgage rates move up and down in the opposite direction of MBS prices. With lower mortgage rates in the limelight, there has been an increase in both purchases and refinances as reported by the Mortgage Bankers Association. It was reported that private sector jobs increased which was positive news. On the other hand, jobless claims increased as well as the unemployment rate for the month of April. While the positive news indicates an economic recovery, the negative news reflects a weaker and slower recovery. 

These mixed reports have continued to create uncertainty for investors trying to determine which ones reflect the true state of the economy. At the end of last week, the price of crude oil dropped significantly bringing about more questions. Crude oil prices quickly rebounded today. In the end, negative economic news has been resulting in lower mortgage rates which is a plus for borrowers, especially as the home buying season is under way. surveys more than two dozen wholesale and direct lenders’ rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

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