POSTED: 04:36 a.m. HST, Aug 18, 2011
WASHINGTON >> 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 today. 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 25 years.
Few expect even 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.
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.
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.
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 months.
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.