Mortgage Rates Hit New Record Low

Mortgage rates fell to a new record low for the week, hitting 4.17% on a fixed 30-year mortgage, according to Freddie Mac. The FHA says it’s the lowest rate on record since 1951. Rates dropped as a result of the Fed announcing that it will purchase $600 billion in U.S. treasuries in a second round of quantitative easing in efforts to aid the ailing U.S. economy.

All loan products Freddie Mac tracks are now at all-time lows. The rate on a 15-year fixed rate mortgage averaged 3.57%, substantially down from 3.63% a week ago. The five year Treasury index adjustable rate mortgage averaged 3.25%, down from 3.39%.

In its weekly report just yesterday, the Mortgage Bankers Association survey indicated that home purchase applications for the week were up 5.5% nationally. However, doubts linger regarding a strong housing recovery even with the record low mortgage rates.

record low

“Despite historically low mortgage rates, however, the housing recovery continues to be slow, owing in part to household job uncertainty and tight credit conditions,” said Freddie Mac chief economist Frank Nothaft. “This allowed mortgage rates to fall to record levels this week.” Treasury bond yields initially fell after the Fed’s announcement but then gradually rose as economic volatility remains a constant in financial markets.

Mortgage rates have remained low for months since the Fed has kept its primary lending rate at or near zero, an historic trend in efforts to keep inflation in check and drive interest to improve the economy. However, employers remain concerned about the direction of the economy and are holding off hiring as evidenced by high unemployment averaging 9.6% nationally.

Mortgage borrowers are required to pay an average 0.8 point for a fixed rate loan at the lowest average on record, while adjustable mortgages require 0.7 point.

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