How low can rates go?
When I was a business reporter at the Herald, a popular game not so long ago was reporting on the latest gas price shocker.
It was a game that usually involved calling local gas stations to check on their prices. There was always some guy on Nantucket who was the market leader, at one point pushing $4 a gallon.
Gas prices, for now anyway, have retreated out of the news. But here come falling mortgage rates to fill the void.
The rate on a 30-year, fixed-rate mortgage has fallen to a national average of 5.17 percent, according to a Freddie Mac survey. That’s the lowest since 1971.
In fact, just this October, the average rate of a 30-year mortgage stood at 6.47 percent.
As rates fall, mortgage companies and brokers are popping out the woodwork, offering up teaser rates hovering tantalizingly around the 5 percent barrier.
The Holy Grail, of course, is the 4.5 percent believed to the goalpost of the Fed’s recent and unprecedented campaign to drive down rates by any means necessary.
Still, as low as they are now, rates could be even lower.
Bloomberg reports rates actually should be a half a point lower than they are now, citing “the historical relationship between home loans and mortgage bonds.”
That’s more than $1,000 in added mortgage payments for most homebuyers in Massachusetts.
Mortgage companies are holding back amid an ongoing credit crunch that has limited their own ability to borrow, Bloomberg reports. There’s also less competition as well given the spectacular spate of bankruptcies and failures in the business over the past two years.
It’s debatable whether low interest rates will be enough on their own to reignite the faltering home sales market.
But for now, those ever lower rates appear to be sparking a rush to refinance, with the Mortgage Bankers Association recently reporting a surge in applications.
I know my wife and I are talking about locking in a lower rate on our house.
Hey, I’ll take falling mortgage rates over rising gas prices any day.
At least it’s one trend with a silver lining for most homeowners out there.
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