By Jay Hummer

There continues to be some debate as to just how strong the housing market really is. No matter what side of the fence you fall on, there is one factor that is not debatable—there have never been better rates for home mortgages.

On June 25^th we hit an all time record when the average rate on a 30-year fixed-rate mortgage dropped to 4.69 percent as reported by Freddie Mac. That rate was the lowest level since the company began tracking mortgage rated date in 1971. The new record breaks a most recent low that was set last December.

Rates have been historically low for a while now, hovering just below 5 percent since May. There are a few factors that contribute to this, including one that jumped out at me:
The European debt crisis is directly translating into lower mortgage rates for Americans.

So you’ve seen the headlines about government deficits and debt in countries like Greece, Portugal and Spain, but what’s the local connection? Simply put, Europe’s problems are making investors nervous, and in turn they are rushing to buy US Treasury bonds. Investors seek the security investing in these mortgage-backed securities and the influx in activity has contributed to lower interest rates for owners.

Let me explain. You see, yields on 10-year and 30-year Treasury securities are typically used to set long-term mortgage rates. Loans with short initial terms, like a 5-year ARM for example, are pegged to shorter-term securities. So, when bond yields drop, typically, conventional mortgage rates fall as well.

Conversely, when yields rise, so do mortgage rates. Why is this? If a lender chooses to sell your mortgage loan to an investor, the lender will likely use Treasury yields as a benchmark for value.

Now, notice in my lead that I wasn’t able to say there has never been a better time to get a mortgage—that’s because the process has become much more stringent. However, if you are someone that has good credit you do not want to miss out on this historic opportunity to either lock in on a low interest rate in buying a new home, or to refinance your existing mortgage and begin to save money each month.

Existing homeowners may also take advantage of the low rates. Refinancing home loans is a great way to lock into an affordable rate. However qualifications have changed recently. So be sure you qualify to refinance. There are great resources out there that are such as The Mortgage Bankers Association’s website which can help you get educated.

There are many factors to consider when deciding if you are ready to become a home buyer, and as always I encourage you to speak with your local RE/MAX agent to determine if now is the right time for you. That being said, you can really position yourself well right now to save significant amounts of money because of these historically low interest rates. Combine this with the fact that New England home prices remain affordable and maybe this is just the right mix.