Lower Mortgage Rates Fail to Boost Home Sales

The average rate on the 30-year fixed mortgage fell below 4% last week for only the second time in history.

On Thursday, Freddie Mac said the rate on the 30-year fixed loan fell to 3.99%, down from 4% last week. Five weeks ago, the average rate dropped to a record low of 3.94%, according to the National Bureau of Economic Research.

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Meanwhile, the average rate on the 15-year fixed mortgage fell to 3.30% from 3.31% after having hit a record low of 3.26% five weeks ago.

However, low mortgage rates have done little to boost home sales. Rates have been below 5% for all but two weeks in 2011, but home sales are set to be their lowest in 14 years.

Refinancing activity climbed 12% last week from the previous week, according to the Mortgage Bankers Association, but was down 13.5% from the year-ago period. The four-week moving average for purchase and refinancing mortgage applications is also down slightly.

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The low rates have caused a bump in refinancing, but that benefit might soon wear off, as many people who can afford to refinance have already done so. Meanwhile, high unemployment and declining wages are making it harder for people to qualify for loans, and are discouraging them from sinking money in a home that could lose some of its value over the next few years.