Mortgage Rates Continue to Fall

The economy is flailing, and mortgage rates are dropping. Two of the rates, in fact, posted new record lows this week. Unfortunately, the low rates can’t help many homeowners or even owners-to-be.
The 15-year fixed-rate mortgage (FRM) averaged 3.54 percent for the week ending August 4. According to Freddie Mac, that is the lowest rate recorded since the mortgage buyer began tracking it in 1991.
The 5-year Treasury-indexed adjustable-rate mortgage (ARM) also posted a new historical low at 3.18 percent. That is the lowest on records that date back to 2005.
The popular 30-year FRM averaged 4.39 percent for the week. That is a low for this year.
The 1-year ARM actually rose, from 2.95 last week to 3.02 this week. But last week’s rate matched the rate seen two weeks earlier as the lowest on record dating back to 1984.
“Treasury bond yields fell markedly after signs the economy was weaker than what markets had previously thought allowing fixed mortgage rates to follow this week with the 15-year fixed and 5-year ARM setting new historical lows,” said Frank Nothaft, vice president and chief economist of Freddie Mac.
“The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported. In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009.”
You would think that historically low mortgage rates would spark a buying and refinancing frenzy for homeowners, but many Americans can’t even take advantage of the low rates, as banks have severely tightened lending practices and are demanding large down payments.
Take those credit issues and combine them with high unemployment and endless homes in foreclosure, and you can see why economists believe the housing market will continue to struggle over the next six months.
I say, we can still hope for a better second-half of 2011.

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