Mortgage Rates Drop To 50 Year Lows

Mortgage rates are down to rates we have no seen in 50 years. Since the early 1970s when we have good data for mortgage rates these are the lowest rates we have seen.

1) December 2008 5.19
2) June 2003 5.23
3) March 2004 5.45
4) May 2003 5.48

Before this rates were at current levels in the late 1950s. Here are rates for the last few weeks.

December 18, 2008
30-yr 5.19 15-yr 4.92 5-yr ARM 5.60 1-yr ARM 4.94

December 11, 2008
30-yr 5.47 15-yr 5.20 5-yr ARM 5.82 1-yr ARM 5.09

December 4, 2008
30-yr 5.53 15-yr 5.33 5-yr ARM 5.77 1-yr ARM 5.02

November 26, 2008
30-yr 5.97 15-yr 5.74 5-yr ARM 5.86 1-yr ARM 5.18

November 20, 2008
30-yr 6.04 15-yr 5.73 5-yr ARM 5.87 1-yr ARM 5.29

A few things to point out, first Arms are still basically pointless. The 5 Year Arm is at 5.6 which is well above the 5.19 offered for a 30 year rate. With 1 Year Arms (at 4.94) and 15 year fixed (at 4.92) offering little savings the 30 year mortgage is pretty much king. There is almost no reason in this market to consider other mortgage products.

I want to be clear about a few things. First although rates are low they are not universally available. In 2002/2003 when rates where low they were available to everyone and they were available for people interested in single family homes as well as investors. Today low interest rates are pretty much only available to people that want to buy single family homes to live in. Investors who plan to rent out properties will receive much high rates. Also loans are really only available to people that can document their income. The limited availability of current rates is one of the reasons that the low rates are not doing more to help the current problems in the market.

So in addition to looking at rates lets look at actual payments. Using our mortgage calculator widget lets take today's rates and translate them into a payment on a 200k loan. To add some perspective we did the same thing using mortgage rates from a week ago and rates from the end of October.

December 18th
30-yr $1096.98
15-yr $1573.26
5-yr ARM $1148.15
1-yr ARM $1066.32

December 11th
30-yr $1131.81
15-yr $1602.50
5-yr ARM $1176.05
1-yr ARM $1084.67

October 30th
30-yr $1258.87
15-yr $1708.31
5-yr ARM $1245.77
1-yr ARM $1120.56

Looking at October 30th we see pretty substantial savings. For a 200k loan the payment would be $161.89 less a month or 14.7 percent less. Arms and 15 year rates are down as well but in the current market these products are pretty much pointless. Basically it's not worth saving a few dollars a month to get a 1 Year ARM and not getting a 30 year rate at historical lows.

So what are rates going to do moving forward? There is talk of the FED having a 4.5% mortgage for new home buyers. It's hard to know if this will end up happening. My advice for people thinking of refinancing is to do so now. Most of the talk I have seen is the 4.5% rate will only apply to new purchases and will not be available for people looking to refinance.

For new buyers it's a little tougher. Personally I think it's not worth it to wait and risk rates jumping up. If rates were at 5.7 it might be worth it to wait for the 4.5 rate. Bu with people getting mortgages near 5 I don't think it's worth it to wait for the government to pass legislation. Partly because even if the legislation is passed the 4.5 rate could have several strings attached.

So what is going to happen with rates next week? I don't know if they are going to go up or down but I think there is still a lot of volatility in the market. So I would not be surprised by a large jump up or down with rates similar to what we have been seeing for the last several weeks.

Seed Newsvine

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