Mortgage Rates…How Low Can You Go?

There seems to be no bottom in sight for mortgage interest rates. Already at their lowest level in more than a half-century, rates dropped to new record lows again this week.

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Analysts say we have the weak economy to thank for the continued descent, but that same trigger is also thwarting what would be the ideal upshot â€" enticing would-be buyers from the sidelines to put a dent in the industry's ballooned housing supply.

Paul Dales, U.S. economist for the research firm ""Capital Economics"":http://www.capitaleconomics.com, put the vicious tug-of-war into perspective.

""The problem is that the economic conditions that underpin housing activity remain weak,"" he said. ""Nearly 10 percent of workers are still without a job and about 50 percent of all households have less than 20 percent of equity in their home. That means half of all households cannot move home, as they won't be able to get another mortgage.""

According to Dales, ""The recent trends in mortgage activity tell you everything you need to know. Even though 30-year mortgage rates have plunged to a record low, mortgage applications are still languishing near 14-year lows. In short, even the mortgage bargain of a lifetime is not enough to bring the housing market back to life.""

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""Freddie Mac"":http://www.freddiemac.com/pmms/release.html?week=35&year=2010 reports that 30-year fixed-rate mortgages (FRM) are averaging 4.32 percent (0.7 point) for the week ending September 2, 2010. That's down from 4.36 percent last week.

Rates for 15-year FRMs came in at 3.83 percent (0.6 point), according to the GSE's study. Last week they were averaging 3.86 percent.

Adjustable-rate mortgages (ARMs) also headed lower in Freddie's survey. The 5-year ARM is now averaging 3.54 percent (0.6 point), and the 1-year ARM is at 3.50 percent (0.7 point).

A separate study by ""Bankrate"":http://www.bankrate.com/finance/mortgages/rates-fall-to-new-all-time-lows.aspx, which is based on data provided by the top 10 banks and thrifts in the top 10 U.S. markets, also found that mortgage rates across the board sank to new record-lows this week.

The tracking company reports that the average conforming 30-year fixed mortgage rate dropped to 4.53 percent (0.42 point) this week, down from 4.59 percent the week prior.

The average 15-year fixed mortgage retreated to 4.05 percent (0.40 point), and the larger jumbo 30-year fixed rate dropped to 5.17 percent, both record lows.

Adjustable rate mortgages were mixed in Bankrate’s survey, with the average 5-year ARM nosing higher to 3.86 percent and the average 7-year ARM drifting lower to 4.16 percent.

Bankrate said in its report, “Nervousness about the economy brought mortgage rates lower, as has consistently been the case since May. An upcoming jobs report promises to add further volatility to mortgage rates.”

The company added, “While low mortgage rates have produced a surge in refinancing activity, they aren't packing the same punch on home purchases because would-be buyers are saddled with existing homes they can't sell, are nervous about their jobs, or remain convinced that home prices have further to fall.”