Mortgage rates sink to low not seen since '50s
Average rate on 30-year-fixed loan is 4.15 percent, but many
can't take advantage
Associated Press
WASHINGTON - The average rate on a 30-year fixed mortgage has
fallen to its lowest level on records dating to 1971.
The rate on the most popular mortgage dipped to 4.15 percent
from 4.32 percent a week ago, Freddie Mac said Thursday. Its
previous low of 4.17 percent was reached in November.
The last time long-term rates were lower was in the 1950s, when
30-year loans weren't widely available. Most long-term home loans
lasted 20 or 25 years.
Few expect record-low rates to energize the depressed home
market. Over the past year, the average rate on the 30-year fixed
mortgage has been below 5 percent for all but two weeks. Yet prices
and sales remain unhealthy and are holding back the overall
economy.
Most homeowners are paying rates more than a full percentage
point higher than the current average. The average rate on all
outstanding mortgages is 5.3 percent, Freddie Mac said, citing data
from the Bureau of Economic Analysis.
After previous recessions, housing accounted for 15 percent to
20 percent of overall economic growth. This time, in 2009 and 2010,
housing contributed just 4 percent to the economy.
"The housing market is not going to turn around because of this,
because it isn't the mortgage rate that matters," said Joel Naroff,
head of Naroff Economic Advisors. Naroff blamed the "horrendous"
process of qualifying for a mortgage despite tougher lending
standards. He said trying to sell a home in many markets is just as
difficult.
Many would-be buyers can't take advantage of the low rates. The
unemployment rate is 9.1 percent, few Americans are getting raises
and many are struggling to shrink their debt loads.
Banks are also insisting on higher credit scores and larger down
payments for first-time buyers. Many repeat buyers have too little
equity invested in their homes to qualify for loans. Others are too
nervous about the economy or their job security to invest in a
home.
The average rate on a 15-year fixed mortgage, which is popular
for refinancing, fell to 3.36 percent, also a record low. It's the
third straight week of record lows for the popular refinancing
option. Freddie Mac's records date to 1991, but analysts believe
the new low on the 15-year mortgage is the lowest ever.
Borrowers who qualify have rushed to refinance and take
advantage of the low rates. Refinancing accounted for 70 percent of
mortgage applications in the first half of the year, Freddie Mac
said. Refinancings tend to provide less benefit to the economy than
home purchases do.
Mortgage rates typically track the yield on the 10-year Treasury
note. Economic fears have drawn investors to the safety of
Treasurys, driving down the yield on the 10-year note to barely
above 2 percent. That helped lower mortgage rates.
The Federal Reserve offered a dim outlook of the economy last
week, saying it expects growth will stay weak for two more years.
As a result, the Fed said it expects to keep short-term rates near
zero through mid-2013.
Roughly 14 million Americans remain unemployed. And the economy
isn't creating enough jobs to rapidly trim that figure. The economy
grew at an annual rate of just 0.8 percent in the first six months
of this year, the slowest such pace since the recession officially
ended more than two years ago. In June, consumers cut spending for
the first time in 20 months.
Fewer Americans bought previously occupied homes in July for the
third time in four months, the National Association of Realtors
said Thursday in a separate report. It said sales fell 3.5 percent
last month to a seasonally adjusted annual rate of 4.67 million
homes. That's far below the 6 million that economists say must be
sold to sustain a healthy housing market.
To calculate average mortgage rates, Freddie Mac surveys lenders
across the country Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage fell to
3.08 percent, its lowest level on records dating to January 2005.
Last week's reading of 3.13 percent also was a record low. The week
before was, too.
The average for one-year adjustable-rate loans fell to 2.86
percent, the lowest on records going back to 1984. Last week's
average of 2.89 also set a record.
The rates do not include extra fees known as points. One point
is equal to 1 percent of the total loan amount.
© 2011 The Associated Press. All rights reserved.