The average rate on a 30-year fixed mortgage has fallen to its lowest level on records dating to 1971.
The rate on the most popular mortgage dipped to 4.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its previous low of 4.17 percent was reached in November.
The last time long-term rates were lower was in the 1950s, when 30-year
loans weren't widely available. Most long-term home loans lasted 20 or
Few expect record-low rates to energize the depressed home market. Over
the past year, the average rate on the 30-year fixed mortgage has been
below 5 percent for all but two weeks. Yet prices and sales remain
unhealthy and are holding back the overall economy.
Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.
Most homeowners are paying rates more than a full percentage point
higher than the current average. The average rate on all outstanding
mortgages is 5.3 percent, Freddie Mac said, citing data from the Bureau
of Economic Analysis.
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.
"The housing market is not going to turn around because of this,
because it isn't the mortgage rate that matters," said Joel Naroff, head
of Naroff Economic Advisors. Naroff blamed the "horrendous" process of
qualifying for a mortgage despite tougher lending standards. He said
trying to sell a home in many markets is just as difficult.
Many would-be buyers can't take advantage of the low rates. The
unemployment rate is 9.1 percent, few Americans are getting raises and
many are struggling to shrink their debt loads.
Banks are also insisting on higher credit scores and larger down
payments for first-time buyers. Many repeat buyers have too little
equity invested in their homes to qualify for loans. Others are too
nervous about the economy or their job security to invest in a home.
The average rate on a 15-year fixed mortgage, which is popular for
refinancing, fell to 3.36 percent, also a record low. It's the third
straight week of record lows for the popular refinancing option. Freddie
Mac's records date to 1991, but analysts believe the new low on the
15-year mortgage is the lowest ever.
Borrowers who qualify have rushed to refinance and take advantage of
the low rates. Refinancing accounted for 70 percent of mortgage
applications in the first half of the year, Freddie Mac said.
Refinancings tend to provide less benefit to the economy than home
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.
The Federal Reserve
offered a dim outlook of the economy last week, saying 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.
Roughly 14 million Americans remain unemployed. And the economy isn't
creating enough jobs to rapidly trim that figure. The economy grew at
an annual rate of just 0.8 percent in the first six months of this year,
the slowest such pace since the recession officially ended more than
two years ago. In June, consumers cut spending for the first time in 20
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.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage fell to 3.08
percent, its lowest level on records dating to January 2005. Last
week's reading of 3.13 percent also was a record low. The week before
The average for one-year adjustable-rate loans fell to 2.86 percent,
the lowest on records going back to 1984. Last week's average of 2.89
also set a record.
The rates do not include extra fees known as points. One point is equal to 1 percent of the total loan amount.
Michael Thomson is a full time Realtor with
the Keller Williams Sunset Strip Office.Â He has lived in Los Angeles
for over 20 years and specializes in the Hollywood Hills, Beverly Hills,
West Hollywood, Hancock Park and Beverly Center-Miracle Mile areas.Â
Feel free to call for questions at 310-927-8422 or visit the website at CityHomesLA .