Mortgage rates are still experiencing near-record lows, despite the improvement of housing conditions. Freddie Mac’s weekly survey of conforming rates has shown that rates on a 30-year fixed mortgage have averaged 3.71% for last week.
According to Smart Money, the mortgage situation seems to defy normal supply and demand rules, especially because there is now a growing demand in the housing market.
Market Watch explains this anomaly by stating that there are a few things that determine mortgage rates, including policy decisions from the U.S. Federal Reserve as well as the overall economic picture both in America and abroad.
The report was put out by Frank Nothaft, chief economist at Freddie Mac, who stated that the Fed has kept long-term interest rates low, in part through its program called Operation Twist, which is scheduled to end in June, according to Smart Money.
Nothaft adds that there is talk among members of the Federal Open Market Committee about possibly extending the program, or even taking other steps to keep these long-term interest rates low.
According to Market Watch, Alex Villacorta, director of research and analytics at Clear Capital, a provider of data for real-estate valuation, stated that prices have seemed to stop their downward spiral, but that home prices have not appreciated as quickly as historical standards predicted. Villacorta added that:
“National home prices are up, and that’s the first time that’s happened in some time. This is a necessary first step to this recovery.”
Ron Chicaferro, a mortgage industry consultant in Scottsdale, Arizona, has said that low mortgage rates is good for the housing market, because it helps would-be buyers who have jitters about making a purchase be more likely to buy a home. He stated that, “The desire is there…but the fear prevents the move.”