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Mortgage rates plummet

The world's sour economic news is good for US homebuyers who can qualify for a loan.

By MSN Money Partner Aug 4, 2011 5:21PM

This post comes from Marilyn Lewis of MSN Money.


Today's ugly economic news has a slim silver lining: record low mortgage interest rates.


Thirty-year fixed-rate mortgages fell this week to 4.39%, on average, from 4.55% last week, says Freddie Mac. At this time last year the rate was 4.49%.


In a year of exceptionally low mortgage rates, some of this week's prices broke all-time records:

  • The average rate for a 15-year loan hit a historic low -- 3.54%, Freddie Mac reports.
  • The average rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage also hit the lowest level ever recorded: 3.18%.

For mortgage shoppers, here's what the downward lurch means:

  • Payments on a $200,000 mortgage at today's 4.39% 30-year fixed rate would be $1,000 a month for principal and interest. At last year's 4.49% rate, payments on the same loan would be $1,012 -- a $12 difference.
  • Payments on the $200,000 mortgage with today's record-breaking 15-year fixed-rate loan -- 3.54% -- would be $1,434.

These calculations don't include the fees and points required to buy these rates, which you can find on this Freddie Mac chart. (Meanwhile, run your own numbers using MSN Money's mortgage calculator.)


"This is the lowest rate on the 30-year fixed in more than eight months," writes Bankrate, looking back over its own mortgage rate surveys.


Global woes

News reports credit the fears of a double-dip recession, European economic woes and poor new U.S. economic reports for the falling rates.


"Moreover, consumer spending fell 0.2% in June, representing the first decline since September 2009," said Freddie Mac's press release.


The economic pressures are the same forces blamed for today's sharp drop in the stock marketPost continues after video.

The New York Times summed up the fears pressing mortgage rates lower: "American indexes fell around 3% as new data heightened fears that the United States may be headed toward a double-dip recession and that Europe's debt crisis could widen."


United Press International also links the rate drop to the larger reaction by global markets to dismal economic news. UPI writes: "Frank Nothaft, Freddie Mac's vice president and chief economist, said 'signs the economy was weaker than what markets had previously thought' contributed to the decline in interest rates."


Rate drop a surprise
Bankrate reports that the drop in mortgage rates was unexpected:

The sharp and rapid decline in rates surprised many mortgage experts. They expected rates to increase even after Congress reached a deal to cut spending and raise the debt ceiling.
"I don't think anyone foresaw the fact that we were going to get the (rate) improvements that we got this week," says Jim Sahnger, a mortgage planner for FBC Mortgage in Jupiter, Fla.
  • And there was one more scrap of silver lining added to today's dark economic news: "On a positive note, there were indications that the housing market is firming," added Freddie Mac's Nothaft. He points to these indications of a slightly improving real-estate market:
  • A trusted home price index from CoreLogic showed prices increasing in June for the third month in a row. It's the first three-month gain since June 2010.
  • Pending sales of existing homes rose in June for the second month, according to the National Association of Realtors. That's up nearly 20% from the same time a year ago.

More on MSN Money:

Aug 5, 2011 5:33AM

America is primed for economic, social and racial revolution.  Out of the ashes may come some semblance of what it was some 235 years ago, when it was first born.  I can see no future in it's present-form existence.  The days of mom and apple pie left us in the 1960's with the advent of the fam-nazi movement, the so-called civil rights movement, the birth of the drug and social change movement, social welfare and entitlement movements.  Gone are the days of self-respect, dignity, hard work and prosperity.  The rich manipulate the poor while the poor leach off the middle-class. 


What was once a beautiful country, full of ideas and prosperity, is now nothing more than a haven for rich Middle-Eastern and Far-Eastern rich fat cats to dine on.  America gives and the world takes from it.  Americans are blind sheep who wouldn't know a hustler or manipulator if they saw one.  Everyday we are bombarded with images of starving African children, with mothers who could  barely  care for them before and surely can't now, with some so-called "relief agency" tugging at our heartstrings and making us feel guilty unless we contribute more.  Calls for assitance from far off countries to send our troops to combat some imaginary "enemy", while that same country swindles us out of billions once we fall in the trap(s). We accept the sick, lame and lazy from other countries to come and feast on our social welfare system, only to complain if they don't get enough. The only country on earth that allows that.


We just weren't satisfied with the status-quo and had to test the waters of change.  Well, here are the results.  Happy fellow Americans? 


The only ones who will benefit from low interest rates are the 3% of Americans who control 95% of  its wealth and the rich fat cats i named above.     . 

Aug 4, 2011 10:37PM
Now all we need are jobs to go with the lower mortgage rates....
Aug 4, 2011 9:20PM

I don't know what I will do with my $144.00 a year windfall from the "plunge" in mortgage rates.


Maybe buy a new Mercedes, or travel around the world, maybe buy that yacht I had my eye on,...gosh,....$12 a month extra. All can say is WOW !!!  Awesome!!!!, no,...DOUBLE AWESOME!!!

Aug 4, 2011 9:05PM
who are these idiots trying to kid a 12 dollar drop ios hardly a plunge in morgage rates it is more like little bump in the road. sensationalists have nothing better to do than make a mountain out of a mole hill.
Aug 4, 2011 7:30PM
Thats because nobody qualifies and property values are still in decline.
Aug 4, 2011 8:05PM
Clinton started all this with Dodd and Frank.
Aug 5, 2011 3:20AM

The key words in the article are "who qualify for a loan'. With record high unemployment, outsourcing of American jobs to China and India, and what American jobs there are being converted to burger flipper wages there are not many Americans who qualify for a mortgage anymore. Add to that, the banks who can voluntarily invest in Treasuries (note that many banks are REQUIRED to invest in Treasuries as a result of TARP of 2008 as a result of the bank bailout) got spooked badly due to the Debt Ceiling debacle do not want to invest in Treasuries, so they throw savers money back into the mortgage kitty, but since there is virtually no demand for mortgages due to the factors indicated in Sentence 1, interest rates drop.


Yes, as the article states that this may be a blessing, but until as a nation we fix the problems in Sentence 1, people are not just going to buy homes and use the banks mortgage money. I feel that the banks would be better off again loaniing to small business who can prove to generate US jobs at liveable wages whose employees can then afford to  buy a home on a mortgage rather than put savers money in the mortgage kitty. The real problem/solution is getting American JOBS at liveable wages.


I know this for a fact, since I used to be a small business owner in 2009 whose business was starved for cash due to the credit crunch at that time, and due to this, as well as many other factors (primarily due to my competitors outsourcing the work that I was trained to do (engineering) to India at cheap rates), I  had to shut down my business.


So listen banks, and put your money in the right place....

Aug 4, 2011 9:37PM

My neighbor saved his money - bought a lot.  Built the basement section and covered it with "tar" paper with tar over that.    Installed a kitchen and bathroom.  Lived there with his family until he saved the money for the house itself.  He and his brother did the work.  He has a nice house and owes nothing on it.


Not a grand house with a $35,000 staircase as the house in a nearby community has - but a nice house.   Here - you can build an adequate house for that.  Many houses here have "sheetrock" on the walls and plastic pipes.  Cheap bathroom and kitchen fixtures - no fancy marble kitchen or bathroom tops.  Many communities here have house prices that range from $60,000 to $80,000 - people can have homes at that price. 


Anyone remember - that for the average person - contractors built houses that weren't fancy - but were adequate?  Now contractors build big, fancy and very expensive.  And - keep in mind that these homes come with a hefty tax burdon.

Aug 5, 2011 9:56AM
Law of supply and demand.  If the requirements for a loan stop most people from qualifying then there is no demand for loans.   Can't qualify for a loan without a "real job", so read the writing on the wall.   Until we have a trade balance with China or start making our own stuff there will not be new jobs.   Then the welfare costs will continue to crush the backs of the middle class.  And our government keeps printing money until our 401K's are worthless.  I think now is the time for a change, but not in the way Obama is going.   (What has he done that anyone in the middle class likes?)  Obama raises $100's of millions for his campaign, all that tells me is that he owes a lot of favors. 
I'm told a piece of real estate in Vegas with 3 bedrooms and a pool can be had for a whopping 15K! I call that a PLUNGE - not a $12 savings on a $1012 payment. Of course, you won't have a neighbor either on the street or in the 'hood' and you are in 'da desert'. You can call that a 'plunge' in the sand-bath! DESERT! Should have been the first clue of real estate madness! Hey, suddenly I don't feel so bad ATT only cut $5 off my land-line in the monthly package deal today. Suddenly (after reading this article) $5 on $35 sounds like a HUGE DROP! What a joke!
Aug 4, 2011 7:53PM

Wake me up when a 15 year is 1% and the 30 year is 1.5%...The mortgage thugs still make billions..Housing sector starts to recover & the consumer economy is fueled by the extra cash Joe/Jane Smith now have that is not going to the bankster.


People go back to work...refi's reach new unprecidented records , homes sell again &

Economy problem SOLVED...

Yeah right. They positively plunged. raotflmao. Property values are in the ditch. Americans have ruined their credit personally and nationally. Eventually they will have to pay somebody to take a house. Oh, thats right they already did that with Freddie and Fannie.
Aug 5, 2011 11:58AM

Too bad nobody can afford to buy a house or afford the risk of it losing value.

Bumper sticker of the week: "At least the war on the middle class is going well"

I happened to look at the national debt clock on line the other day - the ratio of taxpayers to food stamp recipients is about 2.5 to 1. Once the playing field is finally "leveled" my guess is that we'll be right where Russia was 50 years ago. Welcome to the 3rd world, people!

Aug 4, 2011 9:39PM
time to refinance then skip the country.
Aug 5, 2011 12:13PM

There are many that would hear of this and think - the economy is not bad!  What they don't realize is the fact of lack of jobs (jobs that pays above minimum wage), thus in turn qualifying for a loan will be difficult. The typical jobs that gets created is a mere handful or near minimum wage! Then there is the "raising the debt ceiling"!  Many would feel this is an accomplishment! Reality is we are experiencing; population growth, welfare rolls has nearly tripled in the past 10 years, forced early retirement for the 50 plus age groups, corporate positions eliminated and operating on skeleton staffs, etc!


The economy threatens our; Social Security existance - funding will be exhausted by 2030, real estate valuation is declining in many venues, healthcare costs is still increasing, cost of living is increasing due to the fuel costs, etc.


The "American" way is haunting us! An example of this is to assist in human needs - starving, shelterless, etc.  We will always help fellow humans. Look at welfare and the continuous abuse! The actual needy is a low percentage of the recipients. There are many on welfare that was born and raised on (generation to generation) and thus is an accepted way of life! At one time they were considered low income. Reality is they are still considered low income, however a family of 4 on welfare receives approximately $28k per in benefits. Pending the metropolitan area this fact appeals to more of the public since it pays more, than what is available!



Aug 5, 2011 11:28AM
I know in South Jersey, most of the homes are worth half of what is owed on the mortgage.  The prices keep dropping and dropping; but the funny thing -- THE TAXES ARE STAYING THE SAME.  How can a home in Cherry Hill, that was worth 500,000 four years ago, now be listed for 250,000 with the taxes at a whopping 11,000.  Are we supposed to believe this is economic recovery.  Pull up Zillow and look at any Cherry Hill neighborhood - see how many houses are listed for sale - and tell me if they need to start lowering taxes to get people to buy these properties - or let the area turn into another ghetto.
Aug 4, 2011 8:46PM
Mastateflower......  Let me guess, your real estate broker was the one that told you you got a smokin' deal and you were LUCKY to lock in that rate, right?  Ha ha!  Bet you paid the asking price on the house you just bought as well.  Pull your head out.....
Water  made from air, rocket fuel made from water, but our cars still run on oil, Wow!                There is enough hydrogen in 8 oz of water to drive a car 600 miles.
Aug 4, 2011 9:41PM



You have no idea what this guy paid for his house or the interest rate.  Maybe you should pull your head out - you might smell the fresh air.

OK so I have a question?? someone help clue this Naive home owner in.  Don't you have to have your home appraised in order to figure the re-finance numbers.  My property statement the last 3 years the value of my home has gone down.  My taxes always go up?  So how can I refinance when I am upside down in my mortgage??
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