By Mike Colpitts
Lower rates paid for U.S. Treasury bonds sent mortgage rates to their lowest levels in more than two months, driving the fixed 30-year 
mortgage to reach its lowest level in history since early October, and the 15-year fixed loan to another record low, according to Freddie Mac.
The 30-year loan averaged 3.94% with an average 0.8 point for the week, down from 3.99% last week. The average hit the exact same level October 6th. The 15-year fixed rate mortgage averaged 3.21%, a drop from 3.27% a week ago.
The cut in mortgage rates set by lenders comes as a result of U.S. Treasury bond rates falling to their lowest levels in three weeks, hitting 1.90% in trading for the 10-year bond Wednesday. Treasuries are usually a major indicator of how banks and mortgage firms set loan rates.
The 5-year Treasury indexed hybrid adjustable rate mortgage averaged 2.86% for the week, down from 2.93% a week ago. Mortgage interest rates are at their lowest levels since last October, which should produce another major surge in home refinancing for homeowners who were unable to refinance mortgages before new guidelines went into effect at the beginning of this month.
The U.S. housing market is facing a series of obstacles as it tries to recover from the worst downturn in home prices in most areas of the country since the Great Depression. Home sales are rising in most areas of the U.S. even as home prices decline, and are forecast to drop further in many areas of the country in 2012.
“Over the first nine months of 2012 households lost almost $400 billion in property values, which contributed to a $1.4-trillion reduction in overall net worth,” said Freddie Mac chief economist Frank Nothaft.
Serious delinquencies on home mortgages also increased between June and September breaking a six quarter decline as more homeowners ran into financial problems, according to the Mortgage Bankers Association. Record long high unemployment and weak consumer confidence hinder the housing market and the broader U.S. economy.