The survey data is collected from top lenders across the nation from Monday through Wednesday.  The weekly results are posted on Thursday of each week and serve as the “foremost reliable, representative source of regional and national mortgage rate trends and is relied upon by the mortgage industry and the public in gauging market conditions and evaluating mortgage loan options.”

Last week they 30-year fixed-rate mortgage hit an new summer lows of 5.01%.  In April of this year, the monthly average was exactly 4.81% and that was the lowest in the history of the survey.  We are currently sitting very close at an all time low for mortgage rates but it is all relative due to the limited amount of data.  Unfortunately, we do not have accurate data before 1971 so we can only analyze what we have.

With this knowledge, one must ask the question, “Why is the housing market still so bad if mortgage rates are so low?”  As I have said many times, mortgage rates could be at 0% and if Americans don’t have money to make monthly payments it is not going to matter.  To make monthly mortgage payments you must have some source of income, this is not rocket science.  With unemployment climbing towards 10% nationally where is this source of income going to come from for home owners?

Author: Tiffany Mann

Obviously the only way to answer this question is to determine what mortgage rate you can get and how many years are left on your loan.  Do not be fooled into thinking that you can lock in under 5% just because this program was created.  To get a rate below 5% you must have at least 70% loan-to-value in your home and a GREAT credit score.  If this is not the case, you can forget about getting that low rate refinance.  You may very well be able to refinance, but it won’t be at the historically low rates you are seeing advertised.

If you are struggling to make your mortgage payments, the Making Home Affordable Plan will greatly assist you by reducing your mortgage payment to 31% of your monthly income.  If your mortgage is backed by Fannie Mae or Freddie Mac, you will see your mortgage payment reduced to 31% of your monthly income.

Ultimately, President Obama hopes that this will kick start the housing market.  I personally do not think it will work as people are still losing their jobs.  What is the difference in a mortgage payment of $1200 and $800 if you do not have a steady income?  We will see what happens, but this economy will continue to struggle until private industry jobs are created.

I think every single advertisement I have seen in the last week has stated that mortgage rates are going to head lower.  Some of the advertisements even display rates as low as 4.25%.  This is quite ridiculous as this is definitely not the case.  If you look at overall mortgage rates in this country, they have never been under 4.5%, on average.  If we have never seen rates under 4.5% why would they advertise it?  Well, some super-borrowers have a chance to get rates that low, but they do it mostly to lure you in and sucker you into an agreement with them.

Overall, the long term trend is down, but do not be surprised if we see a short term bounce and start to grind sideways for a few weeks.  After that, we will continue to head lower.

Mortgage Rates Trends

This seems to be the beginning of the home builder war for the lowest rates.  All home builders are struggling greatly in the current economy due to the subprime mortgage crisis and the increasing unemployment rate, among other factors.  The special offer expires on April 30th, but if the housing market continues to show an increase in monthly new housing supply, we are likely to see many more deals.

If you are interested in buying in the near future, this is an offer you cannot pass up.  Do not go above and beyond your means just to get this rate, but if you fit the minimum requirements and there are Lennar homes in your market that are desirable, it makes it very appealing to at least consider a Lennar home.  Please be aware of the fact that many more deals like this will follow as the unemployment rate may reach levels that we have not seen in modern history.

Make sure to vote on how you feel about Obama on the Dollar at www.obamaonthedollar.com.  Can you believe people are actually pushing this already?

• Mortgage Rates Trends
• Refinance Sunday
• Stock Market Analysis

With that in mind, how can we possibly believe what rate these finanical institutions are lending money at?  I’m sure Ken Lewis will be willing to tell you whatever you want to hear.  4.25%?  Sure, why not!  Bank of America is profitable so why not lend at rates almost as low as the prime rate?!  The only way that you will truly know what mortgage rates currently are is to personally go through the mortgage application process.  This is quite time consuming, but if you believe what you see on tv or through advertising, you will be let down.

• Home Buying
• Mortgage Rate Predictions
• Mortgage Rates Trends

Over the last 40 years, the overall trend of mortgage rates often follows the trend of the WSJ Prime Rate.  The WSJ Prime Rate is a survey of the 30 largest banks and portrays the average rate at which banks will lend money to their most dependable borrowers.  The prime rate changes when 23 or the 30 surveyed banks see a change in their lending rate.  If you look at a long term chart of the prime rate compared to mortgage rates, you will notice that when the direction of the prime rate changes, it is a very short time after that when mortgage rates follow in the same direction.

In October of 2007, we saw the prime rate fall from 8.25% to 7.75%.  Since then the prime rate has made a steady downward fall to the current prime rate of 3.25%.  In that same period, mortgage rates have fallen from 6.38% to 4.98%.  It makes sense that the interest in which banks lend money for credit cards and auto loans would reflect mortgage rates.  While it is not a perfect correlation, it is very close!

The question we must now ask is when is the prime rate going to reverse its course and head higher?  When it does, we are likely to see the overall trends in mortgage rates bounce as well.  Currently, the Federal Reserve Bank is doing everything in their power to push mortgage rates lower so it is highly unlikely we will see a directional change in the current prime rate anytime soon.  Make sure to stay tuned into Subprime Blogger as we will give you the heads up when things do change!

Each Tuesday I intend to write an article on Mortgage Rates Trends which will help to explain where we have been and where we are going.  Each week I will give new information which will help you decide if the mortgage rates trend will remain down or will reverse and head higher.  Make sure to bookmark the link below and check out the mortgage rates trends each Tuesday.

• Mortgage Rates Trends

The last time mortgage rates were near the current levels was in the late 1960s and early 1970s.  We saw a moderate level of inflation during this time; ranging between 2.78% and 5.84% on a yearly average.  There were signs of an inflationary period coming in 1970 as each month showed an inflation rate of over 5%.  During 1970, mortgage rates actually increased from approximately 7% to 8%.

As the 1970s continued, inflation was rampant.  For any of you who lived during this time, you know prices went through the roof on many commodities.  The following data depicts just how excessive inflation was during the period, the first percentage is inflation and the second percentage is mortgage rate levels:

1974 – 11.03%   -   9.19%
1975 – 9.20%   -   9.05%
1976 – 5.75%   -   8.87%
1977 – 6.5%   -   8.85%
1978 – 7.65%   -   9.64%
1979 – 11.22%   -   11.2%
1980 – 13.58%   -   13.74%
1981 – 10.45%   -   16.63%

As you can see, a high inflationary period was also a period of high mortgage rates.  As inflation decreased mortgage rates dropped back to reality after the early 1980s.  Since the early 1980s, we have not seen two or more successive years of inflation over 5%.  In fact, many economists actually feel that the high unemployment rate along with low consumer spending will cause deflation as business keeps prices low to increase sales.  I disagree.

Now that President Obama has enacted a new tax system, it is likely the price of goods will be passed along to the consumer.  Not only with this help to with the inflation argument, the Federal Reserve has put the United States in an $11 TRILLION hole.  It is very hard to see how the value of the dollar will not plummet.  With the falling dollar, inflation is only going to come in time.

So, what is the next step?  Do we live in a period of inflation AND low mortgage rates?  We definitely live in a time in uncertainty and this may be the most unexplainable aspect of our economy for years to come.

• Home Buying
• Mortgage Rate Predictions

The only way that we will see the housing market bounce is when supply equals demand.  Anyone who has taken a basic economics course knows this.  Currently, there is over 16 months of supply in the housing market.  This is the highest level in modern history.  The only way to make this number fall is to sell new homes!  There are really only two ways to sell new homes: new home buyers or individuals buying an additional home.  Most people buy additional homes as an investment or a vacation home.

It is quite possible that we will see many homes being bought by individuals who currently own a home.  Mortgage rates will fall to historical lows which will give these borrowers a chance to refinance and save a great deal of money.  By saving money, they may have the opportunity to buy a new home with their extra savings.  There is a strong possiblity that this will happen as housing prices are quite attractive in many markets.

The problem remains that individuals buying their first home do not have the capital to get that first mortgage.  It is also likely that they do not have a great deal of credit history which will greatly affect their chances of getting a low mortgage rate.  I have many friends that are in a position to buy a home but realize that their credit score is not where it needs to be.  They want to take a few more years to increase their credit score so they can get a lower mortgage rate.

I also have friends who feel it is extremely risky to buy a home in this economic crisis.  They feel like they are catching a falling knife and do not want to take on this financial risk.  As I explained to a good friend today; if you buy a new home, you will have the opportunity to get an $8000 tax credit and mortgage rates are likely to be low, but….you have to realize that you may buy a $189,000 house today that falls to $145,000 by the end of the year.  Does that $8000 tax credit sound that good now?  The unemployment rate continues to increase in most states so if you are in an area with heavy job cuts, your home could decrease even more.

Even if you do get a low mortgage rate and a tax credit, sometimes it is not worth it.  I fully expect the government will extend the $8000 first time home buyer credit until we see a TRUE bottom in the housing market.  When the months supply of housing starts to decline, it will be quite appealing to buy a new home.  It is just hard to be optimistic when you see lines to get into job fairs that look like the one at the top of this article.

When we see the unemployment rate and months housing supply decrease, then I will be extremely bullish on this economy.  Until then, I am worried that things could get much worse.

• Mortgage Rate Predictions

Back in November, in the article “President Obama, Please Take Note” I wrote

Find a way to stop Ben Bernanke from printing United States dollars.  I am not an economist, nor will I ever claim to be, but the first thing I learned in Economics 205 in college was the law of supply and demand.  The greater amount that is provided of a good or service causes that good or service to be demanded less, therefore the price declines.  If we continue to print US dollars and going deeper and deeper in debt, it is only logical that the United States dollar will continue to decline.

While the value of the dollar has yet to greatly decrease, it is inevitable that it will happen.  Not only will the value of the dollar decrease, we will see HYPERINFLATION as the price of gold, silver and other commodities will skyrocket.

These actions by the Fed are sure to push mortgage rates to the low four percent range.  It is also likely that we will see a refi boom as those with a current mortgage rate above 5.5% will save a great deal by refinancing with Bernanke mortgage rates.  The ultimate problem with these actions are that this is horrible monetary policy!  Keeping mortgage rates historically low will only encourage Americans to buy on credit.  Buying on credit is exactly what got us into the mess we are in.

This country needs to learn to stop buying on credit, but how can we when the government encourages us with artificial interest rates?  Ultimately, the only way this country will get out of the current economic crisis is to create jobs.  Does buying treasuries and mortgage backed securities create jobs?  Maybe a few for the people that take the money out of the printing press, but thats about it.

Lower mortgage rates will definitely help people to save on their mortgage payments; I will never argue that.  The problem remains that only the financial responsible and well off are going to understand how to refinance at these lower rates.  Today, Jim Cramer said that he just got off the phone with a mortgage broker and was able to drop his rate by a point and a quarter.  Do you think that Jim Cramer really needs the extra cash?  Of course not, but these are the types of people who are going to save on their mortgage; not the individuals who are likely to be foreclosed upon.  Those who are struggling financially are in that circumstance for a reason!  They are financially illiterate!  No matter how much money you put into their pockets, they will find a way to spend it while getting no return.

• Savings, NOT Credit, is the Lifeblood of a Healthy Economy President Obama
• Obama’s Making Home Affordable Program WILL Help You Refinance
• Best Prediction of the Stock Market and Economy – Unemployment Rate

Ultimately, the stock market and mortgage rates have no direct affect on each other.  The ways in which they do affect each other is financial market psychology.  If Americans see the stock porfolios dwindling, they feel that the economy is in trouble.  The idea that the stock market predicts the economy is drilled into Americans each and every day.  Well, if the market continues to fall, isn’t this a prediction of things to come.  If we feel the economy is going to get worse, isn’t it likely that the housing market will get worse too?

We know that as the housing market has crumbled, the government has done everything in their power to lower mortgage rates.  Lower mortgage rates “should” lure home buyers back into the housing market.  This is what government officials feel.  It does make sense that this would be the case, but even if rates were at 0%, that doesn’t mean Americans are making more money.

In essence, the falling stock market does affect mortgage rates.  As the market continues to fall, less money will circulate in our economy, less homes will be purchased and the government will take more action.  The action the government will take will be to lower mortgage rates even more in an effort to find a bottom in the housing market.  It is very difficult to call the bottom in any financial market, so it is advisable to get a lower mortgage rate while you can.

Mortgage rates are at historical lows and lenders are actually starting to lend.  Make sure to do some research, check out what your local lenders are offering and always make sure to read the fine print.  Do not get suckered into a deal where you have to pay an enormous amount in fees and closing costs.

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• Refinance Today?  Is It Right For You?