Record Low Mortgage Rates
Cited: Reuters
On August 5, Freddie Mac released a survey that indicates mortgage rates fell last week of July adding to the series of record lows adding to concerns about the state of the economy. With the recent expiration of popular homebuyer tax credits, the rock-bottom rates offer a glimmer of hope for the housing market that is struggling to gain its footing once again.
Interest rates on 30-year fixed-rate mortgages, the most widely used loan, averaged 4.49% for the week to August 5, down from 4.54% a week earlier and my .22% a year ago, according to the survey.
Thirty-year rates have fallen to fresh lows in six out of the last seven weeks. Freddie Mac, the second-largest U.S. mortgage finance company, started the survey in April 1971.
Fifteen-year fixed-rate mortgages averaged 3.95%, down from 4.0% last week, the lowest since Freddie Mac began surveying this loan type in 1991. Fifteen-year rates have hit fresh lows in five of the last seven weeks.
With rates near their lowest since Freddie Mac started the survey, demand for loans to refinance or purchase homes has picked up, boding well for the market and the economy.
“Yet again, interest rates for fixed-rate mortgages and now the hybrid 5-year ARM (adjustable-rate mortgage) fell to … record lows this week following the second-quarter GDP release,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.
Annual revisions cut cumulative growth in U.S. gross domestic product over the past three years to 0.6% from 1.4%, reducing inflationary pressures and allowing longer-term rates room to ease, he said.
Mortgage rates are linked to yields on both U.S. Treasuries and mortgage-backed securities.
Home sales have fallen since the expiration of government tax credits. To take advantage of them, buyers had to sign purchase contracts by April 30. Contracts originally had to close by June 30 but that was extended by three months.
Cameron Findlay, chief economist at LendingTree.com in Charlotte, North Carolina, said the housing market is vulnerable, with a flood of foreclosures in the pipeline and high unemployment weighing heavily.
“The world essentially collapsed after the tax credits expired,” he said. “This baby cannot walk on its own without government intervention.”
Findlay said his biggest concern is that the economy is going to stall and believes there is a 30% chance of a double-dip recession.
“Low mortgage rates are certainly a positive, but jobs growth is more important and without that, a housing rebound will not emerge,” he said.
The U.S. Labor Department said on August 5 new claims for unemployment benefits rose last week to the highest since early April. On Friday it will release July U.S. payrolls data.
The Mortgage Bankers Association said on Wednesday U.S. mortgage applications to purchase homes rose last week for a third straight week as rates tumbled.
Freddie Mac said the rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 3.63%, down from 3.76% last week, its lowest level since Freddie Mac began tracking this loan type in 2005.
For a year ARMs were at 3.55% are now down 3.64% as of last week. Only a year ago, 15 year mortgages averaged about 4.63% and the ARM was at 4.78% with the 5/1 ARM at 4.73%
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My Take: This is very encouraging! I am trying to buy a house so I am very happy about these figures. Of course, if I had the money I’d probably buy a one of the villas in Marbella because it’s beautiful in Spain. However, I cannot afford the Marbella homes. I’m looking to buy a home in Phoenix Arizona where I live. I need to write mortgage broker can be difficult though.
I have looked at Louisville Kentucky mortgage services as well as Phoenix Arizona mortgage services. A Louisville mortgage is a little bit more expensive some of the Phoenix mortgages. I plan on comparing his many mortgage brokers as possible to get the right mortgage.
There is one thing I know I will not need and that is landscaping. Landscaping Phoenix only heats up the house. Now New Jersey landscaping would be great if I lived in New Jersey because their summers are not like Phoenix. In fact, I have seen some pictures of NJ residential landscaping and it is beautiful.
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