Mortgage Rates Dip to New Record Lows

By Mike Colpitts
For the second consecutive week, worries over the U.S. economy and the European debt crisis sent financial markets and Treasury bonds single family home lower. The drop in Treasury yields directly sent mortgage rates to new all-time record lows. The 30-year fixed rate loan hit 3.83%, according to Freddie Mac.

The 30-year fixed mortgage has stayed below 4.00% all but one week since early December of last year, helping to produce a recovery in home sales, despite economic weakness.

The 15-year fixed rate mortgage, which has gained in popularity, especially with homeowners refinancing homes, averaged 3.05% in the Freddie Mac survey with 0.7 point, down two basis points from last week. The 5-year adjustable rate mortgage also fell amid growing concerns over the strength of the U.S. economy to an average of 2.81%, down four basis points from a week ago.

Rates also fell as weak employment figures were reported by the government. “Following April’s weaker than expected employment report and the French and Greek election results raising concerns over the stability of the Euro currency zone, long term Treasury bond yields declined,” said Freddie Mac chief economist Frank Nothaft.

The greater economy added just 115,000 jobs, according to the government during the month of April, far below the 400,000 new jobs that most economists feel need to be added monthly in order for the economy to be on the road to recovery. More people are giving up looking for work as a result of being turned down so many times, and are adding to the rolls of the long termed unemployed.

Healthy employment levels are the single most important issue when it comes to the nation’s housing market. More people working translate to more consumers who can qualify for a mortgage to buy a home or other real estate.

First time home buyers make up roughly one out of three buyers in the current housing market, according to the National Association of Realtors. Move up purchasers usually first must sell their present homes before they can buy another, and without more people working fewer people can afford a mortgage to purchase a home.

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