The average rate on a 30-year fixed mortgage has fallen to its lowest level on records dating to 1971. The rates on the country’s most popular mortgage, the 30-year mortgage, dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said today. Its previous low of 4.17 percent was reached last November.
The last time mortgage rates were this low was back in the 1950s, though 30-year mortgage rates were not widely available back then. Most long-term home loans back then consisted of a 20 or 25-year plan.
This is outstanding news for any prospective homebuyer, as right now is the best opportunity on record to get a low mortgage rate. However, there are very few that expect even these historically low rates to really energize the horrendous housing market in the U.S. Mortgage rates have been under 5% for over two weeks, yet nothing has really happened in the depressed job market.
Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent. 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.
Many would-be buyers can’t take advantage of the low rates. The unemployment rate is currently at 9.1 percent. Very few Americans are getting raises and of the ones that are, they are using that extra cash to shrink their debt load. That being said, Hawaii is still #2 on the list of the nation’s most improved home prices.
Another factor holding home sales back even with the low mortgage rate is the fact that banks are insisting that potential buyers have a high credit score, as well as a big down payment.
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.
These low mortgage rates could be around for quite a while, as the Federal Reserve offered a pretty dim outlook for the economy last week, stating that 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.
Not many Americans are buying homes right now. In fact, 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.