Are we headed back to the days of the sub-5% home mortgage?

It sure looks that way. Mortgage rates are heading lower and some banks have already begun offering mortgage rates below 5%. San Diego-based, for example, is offering a 30-year fixed-rate loan at a bargain basement rate of 4.375%.

Yes, you’ll pay almost $2,000 in fees to get the great rate, and you’ll need a credit score of 700 or above, but so what? Mortgage rates that low don’t come along often.

There is no shortage of reasons why rates are low, but let’s list some of the obvious ones.

The situation in Greece, despite a massive bailout by the U.S. and Europe, has given the U.S. economy a serious case of the jitters. If other Western Europe countries or the U.S itself slide as close to bankruptcy as Greece has, all bets are off. That could lead to an economic depression and years, if not decades, of hard times ahead. True, we’re not close to that happening, but the threat is out there and economists know it.

The termination of the homebuyer tax credits, which ended in April, has dampened the U.S. real estate market. While housing sales have generally been on the rise, most economists expect home sales to decline once May’s numbers are factored into the equation.

Unemployment and inflation are still a threat to the economy. The Federal Reserve keeps a particularly close eye on economic influencers like the unemployment number and on the prospect of rising inflation. The Fed will likely keep rates low if there’s any sign that either are a threat. The Federal Reserve’s Vice Chairman Donald Knohn said as much in a recent speech at Carleton University. “Central banks cannot make unconditional interest rate commitments based only on a time dimension,” Kohn said.

It’s the Federal Reserve’s hard-boiled philosophy that lower rates will trigger an economic resurgence. With all of the above scenarios still in play, and all of them a major threat to economic recovery, expect the Fed to keep rates low and that would keep mortgage rates relatively low, as well.

That’s what we saw, more or less, last week. The BankingMyWay Weekly Mortgage Rate Tracker tells the story:

Description          This Week     Last Week

One-Year ARM         3.926%        3.989%

Three-Year ARM       4.376%        4.193%

Five-Year ARM          4.069%        4.076%

15-Year Mortgage    4.509%        4.497%

30-Year Mortgage    5.066%        5.108%

The good news is that, with mortgage rates low, the deals become more plentiful. For the best bargains out there, check out BankingMyWay’s Mortgage Rate Search. Week-to-week, it’s your best bet for finding the best mortgage rate deal possible.

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