U.S. Mortgage Rates Drop to New Record Low
Mortgage rates in the U.S. have reached a new record low, with the interest rate on a 30-year fixed-rate loan averaging 3.91 percent this week, according to Freddie Mac’s Primary Mortgage Market Survey. That’s down from 3.94 percent last week, and is the lowest for the most popular home loan among buyers in the 40-year history of the survey.
Rates have fallen 0.9 percent since the beginning of the year, which translates to annual savings of $1,200 for a homeowner with a $200,000 mortgage, said Frank Nothaft, Freddie’s chief economist. Rates for 15-year mortgage remained unchanged, matching last week’s record low of 3.21 percent.
According to Nothaft, home sales have been getting a boost from mortgage rates that have remained at or below 4 percent for the past eight weeks. The National Association of Realtors reported yesterday that existing homes were sold at their fastest pace since January last month, and new home sales edged higher in November as well.
Greg McBride, senior financial analyst for Bankrate.com, believes mortgage rates will remain affordable deep into 2012. With the European debt crisis and sluggish U.S. economy leaving investors to search out safe havens for their cash, demand for U.S. Treasury notes should remain high, he said, thus driving down their yields, which mortgage rates closely track.
“For well-qualified buyers, interest rates should be no impediment to home buying in 2012,” said McBride. Homeowners may also take the opportunity to refinance. According to the Mortgage Bankers Association, about 80 percent of all mortgage applications last week came from existing homeowners looking to refinance their old loans into more affordable ones.
McBride even expects that lenders will marginally ease up on borrowing requirements next year. “Instead of requiring a 740 credit score for the best rates, lenders will dip their toes into 720 waters,” he said. Still, those figures are much more cautious than was the case during the housing boom of the earlier half of the last decade, and it will remain difficult for borrowers with less-than-perfect credit histories to obtain mortgages.