30 year mortgage rates dropped below 5% for the second time this year. It was also the second lowest rates posted by Freddie Mac in the last 40 years (the lowest being 4 weeks ago). Rates hit 4.98 this week close to the all time low of 4.96 that was reached on January 15, 2009. The other major mortgage products also inched down this week with the exception of the 1 Year ARM. The one year ARM rose from 4.80 to 4.91. This is the closest the 1 Year ARM has been to the 30 year mortgage in the last few years. This basically means there is no real reason to consider the 1 year ARM since it doesn’t offer much savings compared to the 30 year rate. For now the basic decision is between the 30 year fixed mortgage and the 15 year fixed mortgage. Overall I think this is a positive development. The 5 and 1 year ARM are the cause of many of the current foreclosures. Considering the problems they have caused eliminating their widespread use in the future would be appealing. Below are rates for the major mortgage products for the last few weeks.

Mar 19, 2009
30-yr 4.98 15-yr 4.61 5-yr ARM 4.98 1-yr ARM 4.91
Mar 12, 2009
30-yr 5.03 15-yr 4.64 5-yr ARM 4.99 1-yr ARM 4.80
Mar 05, 2009
30-yr 5.15 15-yr 4.72 5-yr ARM 5.08 1-yr ARM 4.86
Feb 26, 2009
30-yr 5.07 15-yr 4.68 5-yr ARM 5.06 1-yr ARM 4.81
Feb 19, 2009
30-yr 5.04 15-yr 4.68 5-yr ARM 5.04 1-yr ARM 4.80

In addition to rates we also wanted to look at actual mortgage payments. We looked at what the payments would be on a 200k mortgage for the last 2 weeks. We also looked at what payments would be based on the rates from October 16th.

Mar 19
30-yr 1071.19
15-yr 1541.25
5-yr ARM 1071.19
1-yr ARM 1062.66

Mar 12
30-yr 1077.31
15-yr 1544.33
5-yr ARM 1072.42
1-yr ARM 1049.33

Oct 16
30-yr $1258.87
15-yr $1702.87
5-yr ARM $1217.16
1-yr ARM $1093.28

All in all although rates fell below the 5 percent line this week mortgage payments are not all that much lower than they were last week. But if we look back a few months we can see a huge savings when comparing the mortgage one would pay today for a 200k loan compared to October 16th.

So what do we think is going to happen moving forward. The general expectation is that rates are going to move down over the next month. This is mostly due to the government plan to buy up over a trillion dollars of bad debt from banks. Rates should probably fall down to 4.5 to 4.75 this week. But, once the economy recovers rates could rise above 10% due to the massive amount of money that has been pushed into the economy during the recession. It’s perfectly possible in one year we are going to see the lowest and highest mortgage rates in the last 20 years.

Ki works as a realtor in Austin Texas. This site is a resource on Austin Texas real estate. He also has information on mortgage interest rates on his website.