By Mike Colpitts
The 30-year fixed rate mortgage is likely to drop to 4% as banks and mortgage lenders aggressively work to attract more business in the 
midst of the foreclosure crisis, which has resulted in the failures of many banks and jeopardized other lenders’ businesses, according to Housing Predictor analysts.
The bench mark fixed 30-year loan dropped to an average of 4.15% last week, according to Freddie Mac, setting a new record low for the mortgage. Rates on adjustable mortgages and the 15-year fixed rate loan also followed, moving lower to set new record lows of their own.
The foreclosure crisis, which was first forecast by Housing Predictor has destabilized the mortgage lending industry as the nation’s five largest banks, including Bank of America and JP Morgan set aside billions of dollars in cash to cover the losses, which are at all-time record levels as the fallout of the real estate crash completes its fifth year. An estimated 7.2-million homes and other residential properties have been foreclosed since the crisis started.
Savvy marketing companies, banks and mortgage lenders have been slashing mortgage rates to attract more business and have experienced an increase in refinancing with the lowest rates on record. Mortgage rates were at their lowest since the real estate collapse started in the U.S. last October and November until last week. The 30-year fixed rate reached 4.17% in November, according to Freddie Mac, setting a new 50-year low.
Since that time, however, rates have remained low and have bounced back-and-forth erratically, staying under 5% on the highly monitored 30-year fixed mortgage.
Lower rates could boost home sales, especially to first time buyers who have been considering the purchase of a home during the hot summer home selling season. But high unemployment and underemployment hamper the market from making major inroads towards a housing recovery until more unemployed workers find jobs. The U.S. job picture, however, seems bleak as more corporations idle workers in the midst of volatile financial markets and economic uncertainty.
The weak job market, turbulence in financial markets and a surplus inventory of foreclosures with a shadow inventory of homes that may include up to 4 million additional properties all act as reasons for banks and lenders to keep interest rates moving lower for the immediate future.