European Crisis Eases as Focus Shifts to U.S. Economy Sending Mortgage Rates Today Lower

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Average mortgage rates today declined on lower bond yields as the focus shifts from the crisis in Europe to the struggling economy in the United States. Last Friday bond yields increased on the news the European Financial Stability Facility (EFSF) would lend money directly to banks; this sent mortgage rates higher over the weekend.

The market enthusiasm was short lived, bond yields declined yesterday because of the ongoing fears the U.S. economy is slowing and might head back into a recession. The negative sentiment caused current mortgage rates on 30 conforming loans to decline to 3.66 percent, down from an average 30 year mortgage rate of 3.66 percent.
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Today's mortgage rates on 15 year conventional loans are also lower averaging 3.02 percent, down from an average 15 year mortgage interest rate of 3.04 percent. We will probably see 15 year conforming mortgage rates move back below 3.00 this week if the negative sentiment continues to send markets lower.

Mortgage rates on 30 year jumbo loans are averaging 4.26 percent, unchanged from yesterday's average jumbo rate. Mortgage rates currently on 15 year jumbo loans are lower today averaging 3.53 percent, down from yesterday's average 15 year rate of 3.55 percent.

Adjustable mortgage rates are also mixed. Current 5 year conforming mortgage rates are averaging 2.71 percent, down from yesterday's average 5 year adjustable rate of 2.73 percent. Jumbo adjustable mortgage rates are averaging 2.84 percent, unchanged from yesterday's average jumbo rate.

On a positive not signs that the housing market is finally recovering is event in The Standard & Poor’s/Case-Shiller home price index which showed increases in 19 of the 20 cities tracked by the index. This the second straight month that home prices have risen in a majority of U.S. cities.

Another recent sign housing is recovering and might lead the U.S. economy to a stronger recovery is new home construction. Construction spending rose 0.9 percent in May from April, the Commerce Department reported yesterday. This is the second straight monthly increase and the biggest percentage gain since December.

A stronger economy will lead to higher mortgage rates and refinance rates. If you're planning on buying a home but have been waiting on the sidelines for mortgage rates to drop further don't count on rates going much lower. If you're thinking about refinancing and are waiting for refinance rates to drop even lower don't count on that happening either.

Interest rates probably won't increase by much over the next couple of months rates won't drop much either. That is unless the U.S. economy falls back into a recession.
Author: Brian McKay
July 3rd, 2012