Current Mortgage Rates Stimulating Home Sales

For the fourth consecutive week, current mortgage rates on 30-year fixed-rate mortgages dipped. The current mortgage rate on a 30-year fixed-rate mortgage is currently 4.78%, matching a record low set in April, while the average mortgage rate on a 15-year fixed-rate mortgage is 4.29%. As the housing market remains in a somewhat tattered state, these low mortgage rates will likely continue to support the recent increase in sales.

When mortgage applications for purchases slowed prior to the extension of the $8,000 first-time homebuyer tax credit, it was a sign that Congress had to move swiftly. Along with the extension of the first-time homebuyer tax credit came the implementation of the new $6,500 “move up” tax credit for existing homeowners who have lived in their current home for five consecutive years out of the past eight years, and wish to purchase a new home and “move up.” The tax credits, coupled with the already low mortgage rates, succeeded as anticipated in generating mortgage activity as purchase applications began to increase, however slightly.

As the end of the month nears, and with the Thanksgiving holiday already upon us, these new historically low current mortgage rates will likely cause a dramatic increase in purchase applications during the first week of December and beyond. In addition, there are still millions of existing homeowners remaining nationwide who can benefit by refinancing their existing mortgage into a significantly lower current mortgage rate, ultimately saving thousands, if not tens of thousands, of dollars over the life of the loan.

The combination of the federal tax credits and low current mortgage rates are facilitating the demand for home purchases. As a result, home sales are on pace to reach 6.1 million for 2009. As the housing market begins to slowly and steadily dig itself out from a substantial hole, it is vital it does so before the Federal Reserve stops purchasing the $1.25 trillion in mortgage-backed securities in the first quarter of 2010.