Published January 17, 2013
Anyone who has followed mortgage rates for more than just the past couple years may be in awe of today's rates. Historically, 30-year mortgage rates have averaged 8.68%. As of late 2012, they were down to 3.35%.
But does this record low in mortgage rates necessarily make these loans a great deal for consumers? Not if you look at the big picture.
A wider gap
If you consider all consumers, both borrowers and savers, today's mortgage rates may not be as generous as they seem. Current mortgage rates may be low, but judging from today's deposit rates, they could be lower. Here are three reasons current mortgage rates are not such a great deal for consumers:
Measuring mortgage rates relative to deposit rates is one way of determining whether banks are taking more than their fair share from consumers overall. However, for people who are primarily borrowers rather than savers, the relative level of mortgage rates to deposit rates doesn't matter so much; borrowers are really only concerned with the absolute level of mortgage rates.
On that basis, the record low levels of current mortgage rates do represent a good bargain. Even on a relative basis, if you assume that somewhere over the course of a 30-year loan interest rates will return to normal, anyone who locks in a mortgage at today's rates could find themselves borrowing for less than the bank pays for deposits over much of the life of the loan.
That's a good deal, so long as it doesn't become so systemic that it weakens the health of the banking system. If that happens, you can expect that consumers will pay again, in one way or another.
The original article can be found at Money-Rates.com:
Are current mortgage rates such a great deal?