Mortgage rates below 5% for third week in a row

The 30-year fixed-rate mortgage (FRM) averaged 4.92 percent this week, up from last week’s 4.87 percent, according to Freddie Mac today.  Last year at this time, the 30-year FRM averaged 6.46 percent.

The 15-year FRM this week was 4.37 percent, up from 4.33 percent last week but below 6.14 percent a year ago.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.38 percent in comparison with last week’s 4.35 percent and 6.14 percent last year.

The one-year Treasury-indexed ARM was up 4.60 percent from the prior week’s 4.53 percent and the prior year’s 5.16 percent.

This is great news for anyone planning to buy property now, but I’m not aware of any expert who believes that mortgage rates have anywhere to go but up.  Even the self-interested Mortgage Bankers Association is forecasting an increase during 2010.

And I’ve just across a column in Inman News, in which Steve Bergsman cites a couple of such experts.

It “looks like it is going to be huge,” he quotes Celia Chen, a senior director at Moody’s, as saying about the nation’s budget deficit.  She continues:

“If the budget deficit is too large, then the government is borrowing a lot and having to issue more Treasury bonds. That will cause the price of Treasuries to fall and if that happens, yields have to increase and interest rates will rise.”

“There is no doubt that interest rates are going to have to go up,” adds William Conerly, an economic consultant and author of “Businomics From the Headlines To Your Bottom Line: How To Profit in Any Economic Cycle.”

What rising rates mean in this market is that a family’s monthly housing costs will rise if prices don’t slip further, as they well may.  Or they will at best stay about constant if prices fall.

Because of the interest rate tax deduction, mortgage payments arguably may even go down after tax in a housing environment where prices also go down as loan rates go up.

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

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