Money

Mortgage Interest Rates At New Lows

By Ilyce Glink

Updated on: September 15, 2011 / 9:51 AM EDT / MoneyWatch

Think mortgage interest rates couldn't get any lower? Guess again.

This morning, Freddie Mac, one of the two secondary mortgage market leaders, released the results of its Primary Mortgage Market Survey (PMMS), showing fixed-rate mortgages remaining near their 60-year lows as ongoing investor concerns over the European debt market kept Treasury bond yields low.

The 30-year fixed averaged 4.09 percent, a new all-time low. A year ago, the 30-year fixed averaged 4.12 percent. The 15-year fixed, a popular refinancing option, also reached a new record low for the week averaging 3.30 percent. A year ago, the 15-year averaged 3.82 percent.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.99 percent this week, with an average 0.6 point, up from last week when it averaged 2.96 percent. A year ago, the 5-year ARM averaged 3.55 percent.

The 1-year Treasury-indexed ARM averaged 2.81 percent this week with an average 0.6 point, down from last week when it averaged 2.84 percent. At this time last year, the 1-year ARM averaged 3.40 percent.

It isn't just the U.S. economy bond traders are worried about, according to Frank Nothaft, vice president and chief economist, Freddie Mac.

"Continued investor concerns over the state of the European debt markets kept U.S. Treasury bond yields low and allowed mortgage rates to ease once more this week. In comparison, the average interest rate of mortgages outstanding in the second quarter was 5.28 percent. By refinancing into today's 30-year fixed mortgage, homeowners could shave almost $1,715 a year in interest payments on a $200,000 loan," he said in the weekly press release announcing survey results.

Long-term fixed-rate mortgages backed by the Federal Housing Administration averaged 4.08% for several months in 1950-51, according to the National Bureau of Economic Research. The same survey shows long term rates at 4.09 percent in June of 1950.

"Apart from just fixed-rate mortgages, various other interest rates are at or near all-time historical lows as well. Both the 10-year constant-maturity Treasury bond and AAA-rated seasoned corporate bond yields were at 50-year lows over the week ending September 9th. In addition, the 1-year constant-maturity bill, a popular index for ARMs, hit its nadir over the week of September 2nd since data began in 1952."

So, how low are interest rates? Low enough for me to pull the trigger again. Right now, I've got 14 years left on my 15-year fixed at 3.75 percent - which I thought would be the last loan I'd ever have.

But I just locked in on another 15-year at 3.375 percent - opting to put most of the closing costs into the loan so my cash out of pocket is just $350 to close - and I'll save at least $20,000 over the life of the loan if I don't prepay.

But I'll probably continue paying the same amount I've been paying since I traded down to a 15-year at 4.25 percent nearly two years ago. At that rate, I should pay off this loan in under 12 years, and save another $10,000 in interest or more.

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Ilyce R. Glink is the author of several books, including 100 Questions Every First-Time Home Buyer Should Ask and Buy, Close, Move In!. She blogs about money and real estate at ThinkGlink.comand The Equifax Personal Finance Blog, and is Chief Content Strategist at RealtyJoin.com, a community for real estate investors.

Ilyce Glink

Ilyce R. Glink is an award-winning, nationally-syndicated columnist, best-selling book author and founder of Best Money Moves, an employee benefit program that helps reduce financial stress. She also owns ThinkGlink.com, where readers can find real estate and personal finance resources.

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