Rate on 30-year home mortgage drops to record 3.88%

January 19, 2012 by · Leave a Comment
Filed under: Real Estate News 

This is great news if you have solid employment, 20% down payment range and good credit.   My from perspective we can have 1% mortgages rates and 100K average home prices and it won’t matter.   People need jobs and income that support these types of debt service levels.  Rates will continue to fall until the market finds a rate the works for our current economic situation.  With more jobs being sent overseas and income stay flat if not declining, I see these rates going even lower.

In the end, it comes back to what I have been writing on Bank REO from the beginning.   We have a debt problem and that will need to be handled in the only manner that people like Walter Bagehot wrote in his seminal book “Lombard  Street”.  You extend credit the the “solvent” banking institutions and let the insolvent banks fail so you can clear the market of the “bad money” as Gresham put it.   Bad money always chases good money out of the market until it is brought out of the market.

What I am saying is that most of our major banks are carrying loans and mortgage on their books that will never be paid off and they need to be written off and at that point you need to increase capital to cover these losses or go out of business (or be acquired).   You would be surprise how quickly we would bounce back if we flushed this debt from the system and started hardcore on re-balancing our major entitlement programs.    If you think that we need these large banks, think about how many regional banks we have that would be able to meet this demand and if that wasn’t enough, I think there might be a few billionaires that would throw their proverbial hat in the ring to make good loans.

We say we want free-markets and capitalism but reject the most important part, letting companies fail no matter what.  Banks will always be needed so we should not worry that they will disappear.   If you agree or not leave comments below and please call your representative.

ABC News & AP – The average rate on the 30-year fixed mortgage fell again this week to a record low. The eighth record low in a year is attracting few takers because most who can afford to buy or refinance have already done so.  Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year fixed mortgage dipped to 3.88 percent this week, down from the old record of 3.89 percent one week ago.

The average on the 15-year fixed mortgage ticked up to 3.17 percent from 3.16 percent, which was also a record low. Records for mortgage rates date back to the 1950s.

Mortgage rates tend to track the yield on the 10-year Treasury note, which fell below 1.9 percent this week.

For the past three months, the 30-year fixed mortgage rate has hovered near 4 percent. Yet cheap rates on the most popular mortgage option have done little to boost home sales.

High unemployment and scant wage gains have made it harder for many people to qualify for loans. Many don’t want to sink money into a home that they fear could lose value over the next few years.

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