Choose an edition: Wash DC | Chicago

Record-Low Home-Loan Rates Could Begin Creeping Higher by Late 2012

  • May 8, 2012

by Don DeBat

With mid-year 2012 rapidly approaching, benchmark 30-year fixed home-loan rates set a new record low of 3.84 percent, the lowest long-term mortgage rate quoted since 1949.

At the beginning of May, lenders nationwide were quoting an average rate of 3.84 percent on a 30-year loan, reported Freddie Mac’s Primary Mortgage Market Survey. Last year at this time, 30-year fixed loans averaged 4.71 percent.


The 15-year fixed, a popular refinancing choice, averaged 3.07 percent in early May, down from 3.89 percent a year ago.

This year the benchmark 30-year rate has held below 4 percent in all but one week. But forecasters say the rate honeymoon is coming to an end. Freddie Mac’s April U.S. Economic and Housing Market Outlook expects 30-year fixed-rate mortgages to gradually increase in the second half of 2012 to about 4.25 percent to 4.5 percent by the end of the year.

“Fixed mortgage rates held near record lows as the Federal Reserve Board met to deliberate about monetary policy,” said Frank Nothaft, Freddie Mac’s vice president and chief economist.

The Fed reported that it expects economic growth to remain moderate and then pick up gradually in 2012. In addition, it noted that labor-market conditions have improved in recent months and it anticipates the unemployment rate will decline gradually, an important prediction that should buoy housing.

“The housing market has also shown some improvement,” Nothaft said. The Federal Housing Finance Agency’s purchase-only house-price index rose at a monthly rate of 0.3 percent in February.

Moreover, 12 out of 20 metropolitan areas experienced price increases over the month, reported the S&P/Case-Shiller® 20-city index. And, new-home sales in March were stronger than the consensus market forecast. February’s sales were revised upwards to the strongest pace in almost two years, Nothaft noted.

“However, the Fed’s statement warned that despite some signs of improvement, the housing sector still remains depressed,” the economist said.

“Housing continues to struggle amid strong economic headwinds,” Nothaft said. However, a variety of encouraging indicators suggest that the market for homes may be feeling the beginning of recovery, and “more neighborhoods may see a stabilization in overall demand and housing values this spring,” he said.

Freddie Mac forecast that new rental construction for 2012 is likely to be the highest since 2005 if the current pace is maintained.

“High rents saved the apartment sector and this had a positive effect on multi-family properties in general,” said Paul Dincin, partner in Catapult Real Estate Solutions, a firm that specializes in multi-family workouts. “Many vintage apartment buildings in the city and suburbs are changing hands as new investors step in, renovate the properties. As a result, apartment rents are on the rise.”

Since no one is shopping for a house when they don’t have a job, the Freddie Mac economic outlook focused heavily on employment. Here are a couple of job predictions economists made through a cloudy crystal ball:

  • The outlook is for the labor market this year is to remain on track with an increase in job growth over 2011 and a further acceleration in 2013.
  • Expect unemployment to decrease further from 8.2 percent in March to 8.0 percent by the fourth quarter.


Don DeBat’s weekly real estate column is syndicated by DeBat Media Services. For more home-buying information visit his website at:

This article originally published at

Choose an edition: Wash DC | Chicago