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August 11, 2011 in Business
Mortgage rates fall to near-record lows
WASHINGTON — Fixed mortgage rates fell to at or near record lows. That’s good news for the few who can afford to buy a home or are able to refinance. But the rates have done little to lift the ailing housing market.
Freddie Mac said Thursday that the average rate for the 30-year fixed mortgage fell to 4.32 percent this week from 4.39 percent. The 30-year loan hit a record low of 4.17 percent in mid-November.
The average rate on a 15-year fixed mortgage, a popular refinancing option, fell to a record low of 3.50 percent, from last week’s record rate of 3.54 percent.
Mortgage rates tend to track the yield on the 10-year Treasury note. A weakening U.S. economy has led many investors to shift money from stocks to bonds, which are seen as safer bets. That has pushed Treasury yields to historic lows.
In theory, low mortgage rates should provide a boost to the troubled housing market. But rates have been below 5 percent for nearly two years and haven’t helped home sales much. Rates on the 30-year fixed loan were near 6.5 percent five years ago and higher than 8 percent in 2000.
Sales of previously occupied homes fell in June for a third straight month to a seasonally adjusted 4.77 million. The pace is lagging behind the 4.91 million homes sold last year — the fewest since 1997.
New-home sales also declined in June and are trailing last year’s sales, which were the worst on records dating back nearly half a century.
Many people can’t take advantage of the low mortgage rates. Banks are insisting on higher credit scores and larger down payments from applicants. Others have too little equity invested in their homes to qualify for loans.
Historically low rates have helped fuel another boom in refinancing.
Applications jumped nearly 22 percent last week from the week before, according to the Mortgage Bankers Association. Refinancing made up more than 75 percent of all mortgage activity, the group said. That’s up from 70 percent the previous week and the highest level of refinancing this year.
Still, a higher number of refinancing applications is unlikely to have much economic impact. Many people have little or no equity in their homes. So they are not pulling money out when they refinance for home-improvement projects or other big expenditures. And many people already refinanced last year, when the 30-year loan fell to a record low.
To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage fell to 3.13 percent, its lowest level on records that go back to January 2005. Last week’s reading of 3.18 percent also was a record low.
The average rate for one-year adjustable-rate loans plunged to 2.89 percent from 3.02 percent last week. That’s a record low dating back to 1984.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
The average fees for the 30-year and 15-year fixed loans was 0.7 point and the five-year and one-year adjustable-rate loans was 0.5 point.
© Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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fishinjay on August 11 at 9:43 a.m.
Low mortgage rates don’t mean squat if banks won’t loan money to people who don’t currently own a home with equity built up. Without that equity most potential buyers don’t have 10% - 20% to put down. If you pay as much (or more) in rent than you would in a mortgage then it’s damn near impossible to save that kind of money in just a few years.
tobiasg on August 11 at 9:50 a.m.
If you can’t afford it, don’t buy it! We paid off our house the first month we owned it because if you can’t pay off your debt then you have to default. I’m so glad the tea party understands this, unlike the socialists and their commerade Obama!
johnclarke on August 11 at 9:58 a.m.
fishin - On another topic, guidelines have changed for investment properties. Now, if you have a freddie or fannie loan you can do a streamlined refinance. In the past you could not. This is very good news for investors, many were walking away from their rentals. Not good for anyone.
hawken on August 11 at 10:41 a.m.
Sorry. I failed to mention that the Federal Reserve (FED) was established in 1913.
Yup, you guessed it! Keynesian.
fhstorey on August 11 at 2:16 p.m.
fishinjay. In what used to be normal times, rental rates were approximately 75% of home purchase prices. Much of the difference was attributed to payment of taxes and insurance. Other purchase requirements were that house payments not be in excess of 25% of income and total debt payments, 35%. Those prompted new borrowers, having saved that differential to have lower expectations about the size of residence to begin with, an unpopular thought in todays environment when many want and feel they deserve everything now.
lewis8457 on August 11 at 2:32 p.m.
yes get out there and buy a home and watch your value drop i have lost 25 thousand dollars of equity in 3 years.
in spokane owning a home is a bad idea just rent you will be better of in the long run.