Just how low can mortgage interest rates go? Lately it seems like there's no bottom in site. For months now, rates have been falling to new record-lows week after week, and this week, they headed even lower.[IMAGE]
""Freddie Mac"":http://www.freddiemac.com reported Thursday that for the week ending August 12, 2010, interest rates for 30-year fixed-rate mortgages (FRM) averaged 4.44 percent (0.7 point). That's down from last week's average of 4.49 percent. Last year at this time, the rate for a 30-year FRM came in at 5.29 percent.
Fifteen-year FRMs averaged 3.92 percent (0.6 point) this week in Freddie Mac's study. Last week the average rate was 3.95 percent and a year ago it was 4.68 percent.
With mortgage interest rates at their lowest level in 50 years and home prices down significantly across the country, it would seem like now is the perfect time to buy a home or refinance one's mortgage to cash in on some extra savings. But even with today's extremely affordable conditions, mortgage activity has been somewhat muted.
""DSNews.com reported on this anomaly"":http://dsnews.comarticles/record-low-rates-do-little-to-increase-mortgage-demand-2010-08-11 Wednesday, and the economists at Freddie Mac relayed their explanation of why more consumers aren't taking advantage of low rates and the favorable buying environment.[COLUMN_BREAK]
The GSE's economic team traces several deciding factors back to deteriorating home values. With the threat that property values will decline further still, they say potential buyers remain nervous about investing in a home absent big incentives. In addition, many borrowers' home equity is so badly eroded that they don't qualify for a refinance.
Nevertheless, Frank Nothaft, Freddie's VP and chief economist, says ""low rates are helping to heal many battered local housing markets.""
Nothaft points to a ""study released by the National Association of Realtors"":http://dsnews.comarticles/nar-sees-broad-stabilization-in-metro-area-home-prices-q2-2010-08-11 (NAR) this week, which shows that 65 percent of the 155 metropolitan areas the trade group tracks experienced yearly increases in home prices during the second quarter of this year. This compares to 60 percent of areas in the first quarter and only 44 percent in the fourth quarter of 2009, Nothaft explained.
""Bankrate"":http://www.bankrate.com also reported another decline in mortgage rates to new record lows this week.
The company's analysis of data provided by the top 10 banks and thrifts in the top 10 U.S. markets revealed that 30-year fixed mortgage rates have hit 4.57 percent (0.48 point), down from 4.66 percent last week.
Rates on 15-year fixed mortgage loans came in at 4.06 percent (0.42 point) in Bankrate's study, down from 4.11 percent the week before.
The latest decline in mortgage rates followed a poor jobs report for July and the Federal Reserve's announcement about reinvesting bond proceeds in order to jumpstart the stalled economic recovery. Bankrate explained that by reinvesting in more government bonds, the Fed aims to keep rates near their ultra-low levels.
""But low rates alone won't revive the housing market as would-be borrowers remain worried about job loss, don't have equity in their homes, or lack sufficient money for a downpayment,"" Bankrate said.