Wright: Mortgage Rates Fall to a Record Low

With the start of the New Year coming around the corner, the real estate industry expects to have a strong performance in 2012. Falling home prices mixed with historically low interest rates has helped to produce a 10-month high in previously owned home purchases. Affordable lending is spurring activity in real estate whether purchasing a house, investing in real estate or refinancing a home.  The average rate for a 30-year fixed loan in the US fell to 3.91 percent last week, the lowest rate it has ever been.

What’s pushing home mortgage rates down so low? Home mortgage interest rates are primarily driven by market forces. These forces are implying less demand for capital, which decreases the price of money, including home mortgage rates.  Factors such as the European debt crisis and concerns about a slowdown in the global economy have all lead to the 10-year U.S. Treasury note falling to 1.88 percent, which is also pushing interest rates and long-term yields lower as well.  While a negative market outlook causes the interest rates to drop, the reverse is also true. Economic recovery, low unemployment and a surge in home buying will cause interest rates to rise. While most experts do not foresee interest rates falling much lower than they are currently, most agree that there is still plenty of time to take advantage of the historically low rates.

Although it is possible for rates to drop lower than they are now, it is also possible they could rise to as high as 5.25 percent. Most borrowers are becoming accustomed to having rates around 4 percent and it looks as though that trend should continue for the next couple of months. Even though interest rates are expected to stay just above inflation through the year of 2012, experts warn that borrowers shouldn’t get too comfortable and think the low rates will last forever.