The Tale of the Incredible Shrinking Rate

As we reported last week, mortgage rates decreased after The Federal Reserve purchased $750 billion in mortgage related securities. This was done in order to bring the rates under 5% and stimulate activity in the home purchase and refinance segments of the housing market. This action may even cause rates to decrease further as mortgage rates adjust in response to action in the bond market. Mortgage Tracker HSH Associates expect rates to level off at 4.9% and not decrease further.

30 year fixed mortgage products are now being offered by both local banks and national lenders in the 4.6% to 4.75% range with no points. You may want to read the small print as points may be added.

There is so much refinance and new loan business that some banks are not reducing interest rates since they cannot handle the demand. Rates were already in the mid to low 5% range and many homeowners were already in the refinance process. Mortgage brokers are experiencing an overwhelming increase in just one week of refinance and purchase loans according to The Boston Globe. Consumers who are refinancing today are saving thousands of dollars a year in monthly payments. Buyers who take advantage of low prices and low fixed rates will be in the incredible situation of having more “house” at a lower carrying cost. 

There is an important side note: Homebuyers will, in most cases, have to put down at least 25% to benefit from these low rates. Also, jumbo loan rates remain around 6%. Jumbo loans start at $523,750 in the Greater Boston and Barnstable County areas. Congress has defined a new segment of loans between $417,000 and the jumbo starting point to be a class similar to jumbo but partially conforming. Lenders have not embraced this area of financing as of yet, however, it will definitely be pertinent to our market in Provincetown and Truro. We’ll keep you updated.