As Mortgage Rates Drift Lower, it’s Time to Buy



Mortgage rates are being driven by continued European debt crisis. With the recent elections in Greece and France, further uncertainty rules the day in the European economies. In recent days headlines in The Wall Street Journal and other publications have talked about the European Union preparing for the departure of Greece from the EU.

While the European economy continues to generate uncertainty, the United States economy is showing signs of strength. Consumer sentiment in May was at its highest levels since January 2008 according to studies from the University of Michigan. Industrial production is strong. Projected automobile sales for this year have been increased.

Housing starts are strengthening. In April, Housing starts rose to an annualized rate of 717,000 homes in April. This is well over consensus numbers. Existing home sales reached an annualized rate of 4.62% in April.

Mortgage rates are continuing to reach lower levels. In the May 24, 2012 mortgage rate survey by Freddie Mac, the rate of thirty-year fixed-rate mortgages averaged 3.79%. The rate for fifteen-year fixed rate mortgages averaged 3.04%, all with 0.7 of a point.

In the January 5, 2012 the averages in the Freddie Mac Survey were 3.91% and 3.23% with 0.7 of a point. In January 2011, the rates were 4.77% and 4.13%

Since January 2011 the rates for 30-year fixedrate mortgages have been down approximately 100 basis points and 109 basis points on 15-year fixed rate mortgages. For homeowners who refinanced in late 2011 it may be worth refinancing—or considering refinancing—again.

Rates on adjustable rate mortgages are attractive these days. Rates on a 10-to-1 mortgage, the rate is around 3% and is fixed for ten years. An ARM can be an excellent choice if the homeowner who is planning on owning a home for ten years or less.

The Federal Reserve Board of Governors has already stated that it will not raise rates well into 2014. Economists are also pointing to continued turbulence and weakness in Europe. Thus it is likely mortgage rates will remain low for well over a year—and perhaps longer.

Finally, the affordability index is at its most attractive levels in recent times. With home prices well off their highs from five or more years ago—and interest rates at or near record lows—now is a great time to buy a home.

Bill Starrels lives in Georgetown and is a mortgage loan officer who specializes in refinance and purchase mortgages. He can be reached at 703-625-7355 or

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