After the US seized the Fannie Mae and Freddie Mac, the mortgage went down below 6%. How low will mortgage rate go? Will it 3?
The average interest rate for a 30-year fixed rate mortgage dropped 0.3 of a percentage point to 6.04 on Monday, according to HSH Associates, and are expected to decline a little more in the coming weeks.
Thirty-year fixed rates dropped about a quarter of a percentage point by Monday and may head lower, said Keith Shaughnessy, president of Foundation Mortgage in Littleton, Massachusetts. The average 30-year fixed is now 6.08 percent, according to Bankrate Inc., a research firm in North Palm Beach, Florida. In July, the rate was half a percentage point higher, increasing monthly payments enough to price some potential buyers out of the market.
By December, or at least by the start of the spring selling season in April when the bulk of U.S. home sales occur, fixed rates may be near 5.5 percent, Shaughnessy said in an interview.
And before Sunday, Gross says he’d guess that the home market might have had as much as 15 percent more in price declines left. Now, it may be no more than 10 percent.
The 30-year fixed-rate mortgage has fallen to near 6.00 percent on Monday from 6.50 percent on Friday, according to Greg McBride, senior financial analyst at Bankrate, Inc, in North Palm Beach, Florida.
“The interest rate drop is without a doubt entirely attributable to the development on Sunday with Fannie Mae and Freddie Mac and the government bailout,” he said.
“The question is how much of the interest rate drop will actually stick,” he said.
The decline in mortgage rates may provide an incentive to prospective home buyers and for existing homeowners to refinance into more secure, fixed-rate loans, but it won’t be a quick cure-all for the crippled housing market.
Builders, reeling from the record-high foreclosures and a glut of unsold homes, will keep cutting back for the foreseeable future, which will continue to be a major drag on national economic activity.
And, home values — people’s biggest asset — likely will keep sinking.