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Investment Property Mortgage Rates Continue to Plunge


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Just when you thought mortgage rates couldn’t go any lower, Feddie Mac announced this week that the average rate on a 30-year fixed rate mortgage dropped to 4.32%, which is the lowest the average rate has been all year. In fact, this is pretty close to the ALL TIME low of 4.1% in 1950!  Rates on 15-year fixed loans were even lower – 3.5% on average, which is the lowest they have been since 1991.  Keep in mind that these rates are for owner-occupied homes; an investment property mortgage will typically be 0.5% higher, but even these mortgage rates are currently at record lows.

Despite these historically low rates, and despite the fact that property prices are currently at their 8-year low, home mortgage originations dipped to levels not seen in nearly 15 years.  Although mortgage refinance filings have been surging (up 30% and refinance activity represents over 75% of total mortgage activity at the moment), the lack of origination volume is troubling.  The reason is obvious: the economy is in the toilet and it doesn’t seem any better than it was 3 years ago (in fact, I’m no economist but it actually seems worse now).

So all of this begs the question; when will mortgage rates go up?  It’s difficult to answer because it seems like the bottom has been reached, but really, who’s to say?  Mortgage rates are typically tied with long term US Treasury bond rates, the rates of which have dropped like a rock in recent times.  And with the recent S&P downgrade of the US credit rating, it’s difficult to envision the T-bond rates increasing anytime soon.

Additionally, lending standards are so tight, and consumers are so strapped, that a large percentage of people who might have entertained buying a property 5 years ago are now locked out of the market.  Thus, the demand for mortgage originations is down, and as you know when demand is lower than supply, prices are pushed down.

So I really do not see a scenario where mortgage rates will increase in a material way until the 1Q of 2012.  So, in my estimation, if you are ready to buy an investment property, now is the time!



One Response to Investment Property Mortgage Rates Continue to Plunge

  1. Yasmine Wilson says:

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