U.S. mortgage rates have fallen to their lowest level in at least four decades, with the average rate for a 30-year fixed loan dropping to just 4.12% this week, down from 4.22%, according to a statement released today by Freddie Mac. That’s the lowest rate since Freddie Mac began keeping records in 1971. The average 15-year rate fell from 3.39% to 3.33%.
Meanwhile, yields on 10-year Treasury bonds, considered a benchmark for consumer loans, including mortgages, fell to an all-time low on September 6. The continuing debt crisis in Europe and slowing U.S. economic recovery have pushed down borrowing costs across the board, but they have done little to boost the housing market still being flooded with foreclosure properties.
“Homebuyers are not responding to these record-low interest rates,” said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. “The reason interest rates are dropping recently is that the outlook for the economy has gotten weaker. A smart person would be very careful about buying a home unless he thinks his job is very secure.” And with unemployment hovering just above 9% for over two years now, very few Americans have that level of security.
The previous record low for a 30-year fixed mortgage was set only weeks ago when it fell to 4.15% in the week ending August 18. According to the National Bureau of Economic Research, long-term borrowing costs are the lowest they’ve been since the 1950s. Still, mortgage applications dropped 4.9% in the week ending September 2. In July, the number of contracts to purchase previously owned homes fell by 1.3%, the first decline in three months, according to the National Association of Realtors.
And there are no signs the situation is improving. A Fannie Mae survey found that a whopping 78% of Americans said the economy was on the wrong track in August, up from 70% the previous month. Furthermore, 22% of respondents said they expect their financial situations to worsen within the next year, up from 20% in July. Twenty-seven percent of respondents expect home prices to decline over the next year. Sixty-nine percent said it was a good time to buy a home while only 9% said it was a good time to sell.