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Record Low Mortgage Rates Should Be Even Lower Analysts Say

There was an interesting article in the New York Times DealBook section on banks offering mortgage rates higher than where they should be. We have all seen the headlines of record low mortgage rates and refinance rates week after week. Conforming mortgage rates and jumbo mortgage rates are all just above record lows today.

In the NYT's article "With Rates Low, Banks Increase Mortgage Profit" 30 year rates should be around 3.05 percent instead of 3.55 percent if banks were satisfied with the profits they made just a few years ago on underwriting mortgage loans. Current mortgage rates on 30 year conforming mortgage loans are averaging 3.61 percent in Bankrate's national mortgage rate survey.

Mortgage loan providers acknowledge that they are making a ton of money right now from mortgage loans. They also say they can't afford to lower mortgage rates even more because of the higher expenses resulting from stiffer regulations.

This answer isn't a surprise since industry always blames government regulation on higher prices. Well maybe if lenders didn't offer no doc loans and sub-prime loans during the housing bubble, marking those loans as investment grade and selling high risk bad loans to investors.

Investors including the government-sponsored enterprises (GSEs) Freddie Mac and Fannie Mae. Saddling the GSEs with billions of dollars in loses to the point they needed a bailout from the government. Now both Fannie and Freddie are reporting strong profits on these stricter regulations.

While the big banks might not be offering 30 year loans as low as 3.00 percent there are lenders that are. Searching 30 year mortgage rates today on our rate lists there are two lenders offering 30 year conforming rates as low as 3.13 percent. and Amerisave are both offering rates where they should be according to analysts in the NY Times article.
Author: Brian McKay
August 12th, 2012