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When you live in the metropolitan New York City area, you attend dinner parties, and these days the question yours truly gets the most, given connections to the financial community, is not what one would think.
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No, it's not about the global financial crisis or the status of the U.S. economic recovery: it's about home mortgage interest rates. Everyone, or at least every young couple married / about to be married / or married and starting a family is on the fence, or so it seems, regarding whether to buy a home, or if they own a co-op / condo, whether to trade up.
Most appear to be convinced that median home prices in the Metro New York area have bottomed or are near a bottom.
Home mortgage interest rates, however, are another story. Most were certain last year that interest rates had gone about as low as they could go -- roughly 4 percent for a 30-year, fixed-rate mortgage.
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But then rates kept falling, and have seen dropped below 4 percent.
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The average fixed rate for a 30-year mortgage for borrowers with good credit has declined to 3.92 percent, according to data compiled by bankrate.com.
What's more, the average fixed rate for a 15-year mortgage has dropped to 3.28 percent, from 3.29 percent last week. The average rate for a 5/1 ARM is 2.88 percent.
The compelling question for prospective home buyers obviously is -- from a strictly home mortgage interest rate standpoint, all other factors being equal, and assuming you have a good credit rating -- now a good time to consider locking in a 30-year or 15-year fixed rate for a mortgage?
Interest rates may continue to drift lower, but a 30-year fixed rate at/near 3.92 percent is very low for the United States in the modern era (since 1960).
Really Low Mortgage Rates
What's pushing home mortgage rates lower? Home mortgage interest rates are primarily driven by market forces, and those forces imply less demand for capital, which decreases the price of money, including home mortgage rates.
Further, despite the U.S. government's large budget deficit, the 10-year U.S. Treasury note is down to 1.88 percent and that's pushing companion interest rates, or other long-term yields, lower, as well.
What's driving the 10-year U.S. Treasury note's interest rate and other rates lower? Three factors.
First, European government debt concerns are pushing institutional investors out of bonds in debt-laden European countries and in to safe havens, and U.S. Government bonds represent one preferred asset.
