Mortgage interest rates moved down slightly this week. This was a good sign since it was not preceded by any rate cuts from the FED. The 30 year mortgage rate fell from 6.52 to 6.47 and the 15 year mortgage rate fell from 6.07 to 6.00. For arms the 5 year rate fell from 6.02 to 5.99. The 1 year arm was the only one of the 4 rates to increase going from 5.18 to 5.29. If anything the mortgage rates are not more in align with each other. Over the past few weeks the difference between the 1 year arm and the other rates has seemed larger than normal.

To put this weeks changes in context of what has happened over this summer mortgage rates are still quite a bit higher than earlier. For the 30 Year mortgage on May 22 rates fell to 5.98. Then by July 24 rates raised to 6.63. So rates have fallen since then but we are still quite a bit higher than the rates we saw in May. Below are mortgage rates for the last few weeks.

August 21,2008

30-yr 6.47 15-yr 6.00 5-yr ARM 5.99 1-yr ARM 5.29

August 14,2008

30-yr 6.52 15-yr 6.07 5-yr ARM 6.02 1-yr ARM 5.18

August 7,2008

30-yr 6.52 15-yr 6.1 5-yr ARM 6.05 1-yr ARM 5.22

July 31,2008

30-yr 6.52 15-yr 6.07 5-yr ARM 6.07 1-yr ARM 5.27

July 24,2008

30-yr 6.63 15-yr 6.18 5-yr ARM 6.16 1-yr ARM 5.49

So let's see what these mortgage rates would mean for an actual mortgage payment. We ran today's mortgage rates through our free mortgage calculator for a 200k loan. We also looked at what the payments would have been on the same mortgage a week and a month ago.

August 21st

30-yr $1260.19

15-yr $1687.71

5-yr ARM $1197.81

1-yr ARM $1109.36

August 14th

30-yr $1266.76

15-yr $1695.28

5-yr ARM $1201.67

1-yr ARM $1095.75

July 24th

30-yr $1281.28

15-yr $1707.22

5-yr ARM $1219.75

1-yr ARM $1134.32

So what else is going on in the mortgage industry. First it looks like the government might take over Freddie Mac and Fannie Mae. A few months ago it was made clear that Freddie Mac and Fannie Mae would be protected while other smaller banks would be allowed to fail. Now with Freddie and Fannie running into serious financial problems (Freddie Mac stock has sank from 65.88 to 4.75). Oddly enough one of the problems Freddie Mac faces is that because the US government has made it clear Freddie Mac is too large to fall, investors are hesitant to give funds to Freddie Mac under the assumption that their investment will not be repaid following a government takeover.

So what will happen following the government takeover of Freddie Mac. Personally I think it will be positive. Over the last several months Freddie Mac has created a pretty large list of loans they will not provide backing for. This has hurt the ability of people to get loans and in turn has been one of the negative factors dragging down the national real estate market. If the government takes over Freddie Mac a lot of these restrictions will probably be pulled back. So while it won't magically cure all the problems with the national real estate market it will alleviate at least one of the negative factors weighting it down.