Another New Low
30-year fixed-rate mortgage: Averaged 5.14 percent with an average 0.8 point for the week ending December 24, 2008, down from last week when it averaged 5.19 percent. Last year at this time, the 30-year FRM averaged 6.17 percent. The 30-year FRM has not been lower since Freddie Mac started the Primary Mortgage Market Survey in 1971.The 15-year fixed-rate mortgage: Averaged 4.91 percent with an average 0.7 point, down from last week when it averaged 4.92 percent. A year ago at this time, the 15-year FRM averaged 5.79 percent. The 15-year FRM has not been lower since April 1, 2004, when it averaged 4.84 percent.
Five-year Treasury-indexed adjustable-rate mortgages ARMs: Averaged 5.49 percent this week, with an average 0.6 point, down from last week when it averaged 5.60 percent. A year ago, the 5-year ARM averaged 5.90 percent.
One-year Treasury-indexed ARM: Averaged 4.95 percent this week with an average 0.6 point, up slightly from last week when it averaged 4.94 percent. At this time last year, the 1-year ARM averaged 5.53 percent.
Commentary
Interest rates on 30-year fixed-rate mortgages eased for the eighth straight week and set another record low since Freddie Mac's survey began in 1971," said Frank Nothaft, Freddie Mac vice president and chief economist. Real GDP growth fell 0.5 percent in the third quarter of the year, pulled down by the largest drop in consumer spending since the second quarter of 1980. The market consensus calls for an even larger decline in the last three months of the year.
The housing market, meanwhile, continues to contract. Existing home sales (excluding condominiums and co-ops) fell 8.6 percent in November to 4.0 million houses (annualized) in November, representing the slowest pace since July 1997. Moreover, the median sales price fell 12.8 percent from November 2007, the largest 12-month decline since records began in January 1968, according to the National Association of Realtors®.
Rates alone are not doing enough to slow the downward trend in housing prices. The Fed has just gone from making Qualitative loans to Quantitative loans. This means that we are ready to throw money at problems and worry less about the quality of the loan and more about the need to keep things afloat.
I am hoping that the Fed simply buys the 10 year treasury bond and puts money supply into the marketplace while lowering the interest rate which so many variable mortgages are tied to. This would be direct action that would be almost immediate help for all the sub prime and negative amortization loans that are still out there and defaulting. And, in effect, the Fed would be buying its own debt and providing serious help to the cause of the problem.
Thanks for Reading
Howard Bell
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