Hover over this image for caption and link ↓↓↓

Normally this report is measured, but it’s hard to temper the current situation: we’re in an unprecedented government credit explosion. Low rate bonanza. Full tilt refi boom. Best time for homebuyers who select the right deal.

The ironic reason for this boom is that is that global developed economies are so unstable because of the last credit boom. But the late-1990s to 2007 credit boom wasn’t just loose monetary and fiscal policies, it was also loose credit standards born out of sweeping financial deregulation. We all know the story: Home loans made to unqualified (mostly U.S.) borrowers underpinned bond funds around the globe and countless derivatives were created from those bonds—and it all crashed when home prices plummeted.

At least this time credit guidelines are more strict, as any homebuyer or refinancer knows all too well. Getting a mortgage funded involves painstaking scrutiny of borrower and property profiles. The rewards, of course, are the rates. You can view current rates below and see this rate chart from 1971-Present. more…

Here’s the latest record low rate chart. Click chart for full size. And visit this link for the fine print on displayed rates.

Below is a chart from Mortgage Market Guide showing 4% coupon Fannie Mae 30 year mortgage backed securities trading for the last 6 months. Currently, this is the most common benchmark lenders use to price consumer mortgage rate sheets daily. When these bond prices rise, rates fall, and vice versa. Note the drop in prices leading up to the March 31 expiration of the Fed’s 15 month, $1.25 trillion mortgage bond buying program. The Fed was buying mortgage bonds to drive rates down and stop the great recession from becoming a depression. When this was coming to an end, you can see here MBS sold off and rates rose. But then the European debt crisis set in, inflation has been nonexistent, GDP is ok but shaky, and consumer sentiment and jobs also shaky (scroll to data section for current stats).

The result is mortgage bonds have risen to record levels, pushing 30yr fixed rates (on single family home loans up to $417k) down to new record lows: they were around 5% late-March and around 4.5% today. It’s unsustainable, but unquestionably favorable for those who qualify for home loans in this rigid underwriting environment.

Back in January, here’s what we said about rates and the economy:

“As we move through 2010, our outlook is for waning Fed support to push rates approximately 1% higher, and for a choppy economic recovery marked by modest GDP growth and minimal employment improvement.”

Conforming 30-year fixed rates were at 5% at the time. At this July 14 writing, rates are much lower at 4.57%. Clearly our rate view was conservative but at least our economic outlook is still accurate, and at least rates are lower. more…

Rate Snapshot
Rates have dropped steadily since May 6 and hit two new record lows in each of the last two weeks. Rates for Conforming loans up to $417k, Super Conforming loans $417k-729k by county, FHA loans, and jumbo loans above $729k are below. Here is a chart showing Conventional (non FHA) 30yr Fixed mortgage rates from 1971 to Present (FULL SIZE CHART). The all-time record low of 4.58% with .7% in points was set the week ending July 1. Here’s the fine print on rates used in the chart. The fine print on the rates in this WeeklyBasis report is at the bottom of the report.

Why Rates Are So Low
In an unprecedented rate stimulus exercise from January 1, 2009 through March 31, 2010, the Federal Reserve bought $1.25 trillion in mortgage bonds. Rates are tied directly to mortgage bonds, so when those bond prices rise on buying rallies, yields (or rates) drop. Rates were already near all-time lows as of March 31 when the Fed ended its program. more…

Rates have dropped to new record lows twice in the last month, with the most recent record rate lows coming between June 23 and July 1. And despite the June jobs report today showing the biggest monthly job losses in 2010, rates couldn’t break any lower. The Bureau of Labor Statistics non-farm payroll report showed that the economy lost 125,000 jobs in June which includes a 225,000 reduction in the Census workforce (which count as full-time jobs on BLS rolls despite their temporary status). But 83,000 new private sector jobs were created, and this somewhat positive figure is a big reason rates didn’t drop further today—the other big reason is that mortgage bonds are trading at overpriced levels and it seems improbably they’d rally any higher (which would bring rates lower). The net job loss toll since the recession began in December 2007 at 7.48 million, but 2010 shows a net job gain of 882,000. BLS also reported that 14.6 million people are unemployed. This is a 9.5% unemployment rate, up 4.6% since the recession began in December 2007. See charts and additional commentary on the U.S.’s 8.6m involuntary part-timer workers below.

Additionally there are now 8.6 million people who would like to work full time but are working part time because their hours have been cut or they can’t find full-time jobs. This forced-into-part-time-work category is up 3.7m million since January 2008, and while it has improved in the last two months, it’s a volatile number. It decreased 900k in January (at the time, it was the first decrease in nine months), then increased by 800k in the two months before April, was flat in April, and decreased by 525k in May and June. This is the fine print of the jobs report—the headline job loss and unemployment statistics show that these 8.6 million people are employed and therefore not in the job loss category, but because of their job status these 8.6 million workers aren’t likely to be consuming at normal levels. This poor statistic in the jobs report is mostly unreported and trading decisions don’t seem to be made on this figure. But until there’s movement here, a sustained recovery seems hard to achieve.
CHART 1: MONTHLY JOB GAIN/LOSS DECEMBER 2007 TO JUNE 2010

Every Thursday, Freddie Mac releases its Primary Mortgage Market Survey (PMMS). This is the official record on mortgage rates and source material for the overwhelming majority of rate reports in the media—reports that very often exclude critical details rate shoppers need to know. Since the one-day market crash May 6, mortgage bonds have rallied to insane levels and mortgage rates have dropped to new record lows several times. So news stories about record low rates hit at the end of each week, but they are for rates that were available the previous week. And only if you have a single family home, and a loan of $417,000 or less, and lots more fine print. Below is a checklist of characteristics used in the Freddie Mac PMMS survey, so you know if these rates apply to you or not.

PMMS rates reported in the press each Thursday are for the week leading up to (and not including) Thursday. Mortgage rates are tied to mortgage bond trading, and as such, rates change all day everyday. The Thursday PMMS report on rates is for rates that are long expired, so it’s critical to get market-relevant quotes from a mortgage lender, not a news source. Also below are some other useful links for understanding rate quotes and rate locks. more…

Rate Snapshot
It’s quite surprising that rate volatility has been minimal for three weeks. As such, zero-point rates on 30yr fixed Conforming loans (up to $729k) held last week near record lows for a third straight week, and one-point rates on Jumbo loans (above $729k) remain steady in the low- to mid-5% range. Rates for each category below.

Rate Factors Week of June 21
Volatility could return with a full economic slate next week. Here’s the market moving data for the week, each noted with what impact it could have on rates: more…

Zero-point rates on 30yr fixed Conforming loans (up to $729k) held last week near record lows for a second straight week, and one-point rates on Jumbo loans (above $729k) are steady in the low- to mid-5% range.

Rate Lock Advisory Week of June 14
WeeklyBasis continues its rate lock bias going into next week because European debt problems that caused U.S. rates to drop during May and early-June are easing, and rates could reverse as a result.

This coming market week of June 14-18 is likely neutral for rates. We’ve got business and consumer inflation reports Wednesday and Thursday, and housing starts and building permits Wednesday. The X-factors for rate markets are ongoing global debt fears, and continued Senate and House debate to reconcile their two versions of financial reform bills. Mortgage bonds remain in a slightly overbought state, and if these bonds sell off, rates would rise. more…

Zero-point rates on 30yr fixed Conforming loans (up to $729k) begin the week back at record lows, and one-point rates on Jumbo loans (above $729k) are steady in the low- to mid-5% range. The European debt crisis flared up again last week and Friday’s jobs report was drastically lower than expected. The result was that global investors continued to be net buyers of Treasury and mortgage bonds as a safe haven, and when mortgage bond prices rise on these buying rallies, rates drop.

Record Low Rates To Start Week
As of market close Friday mortgage rates were again at their lowest levels since 1971. Here is a chart showing this. more…