Loans.org: Good Chance Mortgage Loan Rates Will Drop Lower

    RANCHO CUCAMONGA, CA, July 18, 2012 /24-7PressRelease/ -- Since the beginning of May, Freddie Mac has reported 11 weeks of record-breaking low mortgage loan interest rates. With the exception of one week, national interest rate averages have either matched or broke historical levels over these last 2.5 months. However, home purchase statistics haven't been rising as experts have hoped.

Prospective buyers might just be waiting for this interest rate to hit rock bottom before they apply for a home loan, and, according to loans.org, there still might be room for the 30-year rate to fall even lower.

Interest rates are an essential mechanism to the lending industry's existence, as it allows lenders to see a profit on their money lent. These lending rates are what incentivize banks, credit unions and private lenders to pass their money along to borrowers. But lenders don't have an unlimited supply of money to grant borrowers. Instead they borrow money, just like the public.

The difference, however, is that banks receive a heavily discounted rate on the money they borrow. That rate is called the federal funds rate.

Source: http://www.federalreserve.gov/monetarypolicy/openmarket.htm

As Brett Sinnott, director of secondary marketing at CMG Mortgage Group told Bankrate.com, "If it is more expensive for banks to borrow, they will pass that expense on to their customers."

Right now, the federal funds rate is about as low as it can possibly go, resting at mere fractions of a single percent.

Loans.org compiled data from the Federal Reserve Bank of New York and constructed a graph that depicts the trends of the federal funds rate from 2006 to the present day. They then overlaid the trends of the 30-year mortgage loan rate for the same time period. What they found was that, back in 2006, banks were lending home loans at rates just 1 percent higher than they were borrowing money for. Today, even with these record-breaking low rates, banks are lending mortgages at rates 3 percent higher than the federal funds rate.

"This tells us that mortgage loan rates have the potential to continue their downward trajectory," said loans.org in their analysis.

So long as the federal funds rate remains low, it is possible for mortgage loan rates to fall even lower.

To learn more about the home interest rates and other borrowing issues, you can go to http://loans.org/mortgage to find a frequently updated library of financing information. Additionally, prospective loan applicants can access a free-to-use quote-comparison generator that is designed to help consumers receive the lowest interest rates possible.

To access the full article on where mortgage loan interest rates are headed, readers can follow the "Articles" link at the top of any page on the site.

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