30-Year FRM Rates: Who Says Lower Rates Won't Do Much Good?

At last! Lenders begin to offer 30-year fixed mortgages at rates below 5%:

Jill Pfeiffer, a mortgage broker in San Diego, this week obtained a 4.875 percent rate on a 30-year fixed loan for a homebuyer with a credit score above 750, she said in an interview.

“It’s the lowest I’ve ever locked in on a 30-year fixed” since she began her business in 1996, she said.

The loan, with Sun Trust Mortgage Inc., had no origination fee or points, a percentage of the loan amount that lenders charge, Pfeiffer said. At least two other lenders could have matched the rate, she said. She also had four inquiries from homeowners looking to refinance mortgages.

Bullish! So where in blazes does FBR's Paul Miller get off saying lower rates won’t do much good? He tells Bloomberg:

I don’t know if there is a magic number now that everyone is freaking out about the economy. The home buyer is scared out of the market. . . . Even if rates go low enough, if you got married, you’re 28 years old with no kids -- the typical first time buyer --you’ll wait a year and continue to rent because there are good deals out there.

"Scared out of the market"? Really? Mortgage purchase applications have risen for the past three weeks in a row, seasonally adjusted, and that was before this latest mortgage-rate decline. In the hardest-hit markets, such as Orange County California, home sales are running well ahead of where they were last year. Miller seems to be projecting. . .

Comments

[cadoggy:]

Applications may be up but what about approvals? Does anyone track the ratio of applications to closings? That would be more interesting.

And it's hard to believe that just because interest rates drop below 5% that home buyers will ignore all the other bearish signs out there:

1) record high inventories
2) record high unemployment
3) a price floor that might as well be made out of
paper since 50% of sales are distressed.

Jan 09 01:50 PM

[deflation r...:]

I'm 28, married with a 6 month old and deployed to Iraq. Oh yea, I'm from Orange County. I'm coming back to the US with a boat load of cash and the ability to get a VA no money down loan. I'm going to rent. Once inflation causes rates to rise again (and housing prices to fall further) I'll buy my family's home.

Jan 09 01:53 PM

[gwinner:]

My mother submitted to refi with Wells Fargo yesterday. I was impressed to see that she will get a better rate with a 60/40 loan than a 80/20, that's the way risk mitigation should be rewarded by lenders. She was told that Wells Fargo has prioritized new loans over refi's and it has so much loan volume that refi's are taking 45 to 60 days.

I agree with Deflation Rocks, I believe your analysis is correct and your patience will pay off provided interest rates don't go too high and you have enough cash (that's going to be a timing play). Most buyers in San Diego do not appreciate the risks of buying now and the low mortgage rates and current level of deflation are enticing them to act.

Jan 09 02:50 PM

[Basic Finance:]

Are new mortgage applications really a good measure of buyer demand? I signed my contract for a new condo almost a year ago, but didn't actually finalize the financing until today (at an amazing 4.375 with 3/8 points). I'm certainly happy about the lower rates, but it had NO impact on my buying decision. I think weekly fluctuations in mortgage applications are really just surges from a pool of buyers who have already decided to buy, but who are trying to time the rates, not from "new" buyers.

Jan 09 03:19 PM