Mortgage rates drop to a new low
January 30, 2012
Fixed mortgage rates declined to a record low recently for those that can afford to refinance or purchase homes. However, few families are financially able to take advantage of the rates.
Last week, Freddie Mac stated the average rate on a 30 year fixed mortgage declined to 3.89%, which is a bit below the prior record of 3.91% seen only three weeks ago.
Mortgage rate records were started in the 1950’s.
Not only did the rate decline for a 30 year fixed mortgage but also for a 15 year fixed mortgage to 3.16% which is down from the percentage seen three weeks ago of 3.21%.
The reason the rates are lower is they track the yield on the 10 year Treasury not that fell under 2%. They may fall even farther in 2012 if the Fed starts up bond purchases as a few economists believe.
Average fixed mortgage rates were still around 4% at the end of last year. However, most Americans do not have the ability to take advantage of the historic low rates or they would have done so before this time.
The main reasons Americans are not taking advantage of the low interest rates are low wages and high unemployment. Most do not want to put their money into a home that may lose value over time instead of building equity.
Mortgage applications are down on a seasonally adjusted basis this last month as reported by the Mortgage Bankers Association. Freddie Mac’s chief economist, Frank Nothaft, stated that until companies start hiring and unemployment drops considerably, the lower mortgage rates will remain low key. Occupied homes are selling a bit better than figures seen in 2010. New home sales in 2011 will probably go down in history as the worst year on the books dating back a century.
Homebuilders have hopes that these low interest rates will help stir sales in the coming year. The National Association of Home Builders sentiment rose in the month of December due to the low interest rates to the highest level seen in over a year. However, these interest rates have not helped the housing industry.
The average fee dropped from 0.8 to 0.7 for a 30-year loan while a 15 year fixed mortgage stayed the same at 0.8.