WASHINGTON – The spreading financial turmoil overseas helped push mortgage rates to their lowest in six decades, but record low rates are failing to spur housing demand.
The average for the benchmark 30-year, fixed-rate loan fell from 4.22% last week to 4.12% this week, its lowest since 1951, when most long-term home loans lasted just 20 or 25 years, according to Freddie Mac.
The average for the 15-year mortgage fell from 3.39% to 3.33%, likely the lowest ever, according to Freddie, which has only kept records on the 15-year since 1971.
ARM rates also remained in record territory, with the average for the five-year ARM slipping to only 2.96% and the average for the one-year ARM falling to just 2.84%.
But the record low rates have failed to boost lending, with the Mortgage Bankers Association reporting yesterday its weekly index of mortgage applications declined another 4.9% last week. Refinance activity fell 6.3%, according to the MBA’s weekly survey, which covers more than half of all U.S. retail residential mortgage applications. Purchasing increased 0.2% in the week ended Friday.
Frank Nothaft, chief economist for Freddie Mac, attributed the plunging rates to the economic turmoil overseas and the poor jobs market. “Market concerns over Eurozone sovereign debt default and a weak U.S. employment report for August placed downward pressure on Treasury bond yields and allowed fixed mortgage rates to hit new lows this week,” said Nothaft.
"The Federal Reserve painted a bleaker picture as well in its September 7th regional economic review,” said Nothaft. “Many of the Fed's manufacturing contacts downgraded or became more cautious about their near-term outlooks due to increased economic uncertainty."
