For the sixth week in a row, mortgage rates on 30 year fixed loans improved as interest rates continued to fall below the 5.5% marker. About two months ago in October, homeowners were looking at about 6.5% for a similar 30 year fixed mortgage. Many are wondering if lower mortgage rates will be the cure for this struggling housing market, but over the past few days, and interesting effect has occurred. As homeowners welcome these lower mortgage rates, individuals are actually staying on the sideline and putting their mortgage plans on hold just in case rates drop even further.

One issue that has been heavily speculated is the possibility of conforming loans from Fannie and Freddie dropping below the 5% mark. This move would certainly stir up mortgage activity, but the recent anticipation has ironically slowed down current mortgage activity. 

As potential homebuyers sit on the edge of their seats, waiting for these heavily discounted mortgage rates, many have put ongoing deals on hold in hopes of getting a better deal. Although many might be willing to wait a week to see if mortgage rates drop by almost a full percentage point, it’s important that you don’t lose sight of time and the deal in front of you.

Then there’s also news of a 4% mortgage rate from James Lockhart himself-of course, no specific timeline was given. Although nothing has happened yet, the anticipation is torturing many homeowners who are currently on the fence with their mortgage decisions. One issue worth noting is that it is currently unclear whether these lowered mortgage rates will be offered strictly to new purchases, or to both purchases and existing mortgage refinances. Purchases below $417,000 should see the most benefit as they meet the confirming guidelines of Fannie and Freddie. With homebuilders and banks stuck with large inventory of homes, the incentive to discount purchase interest rates has taken top priority.

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