A weekly report released by Freddie Mac revealed mortgage rates have returned to record lows this week. The rates have been reasonably low for some time, but as of close of business on Thursday, 30-year fixed rates had dropped to the lowest levels in nine months and 15-year rates dropped to the lowest on record.
15-Year Fixed Rate Reaches New Record
Mortgage rates have been below average for several months, with rates hovering at or below the 4.50-percent line for 30-year mortgages and near record lows for 15-year mortgages. However, this week, Freddie Mac announced that rates had dropped even lower.
According to the mortgage giant, the 30-year fixed mortgage averages 4.32 percent, which is near the lowest seen in 50 years. Further, the 15-year fixed averaged 3.5 percent this week, which is the lowest rate on record.
Experts credit the latest drop in rates to the recent announcement from the Federal Reserve that it would keep its rate near zero until 2013 to help control the struggling economy. Because the central bank’s rates will remain low for some time, it’s likely that mortgage rates will remain low as well.
Will Low Rates Help Home Sales?
While low rates traditionally signal an increase in home sales, recent history shows that the poor economy has left prospective homeowners too wary to consider purchasing a home. As a result, home sales continue to remain low.
A recent report from Morgan Stanley revealed that home ownership has reached the lowest level in 46 years. Currently, only roughly 59 percent of individuals own homes with a much larger number than in the past opting to rent instead.
The decision to purchase a home is a difficult one to make, especially with the unemployment rate still high and uncertainty that job prospects will be available long enough to make a 15- or 30-year commitment.
It seems that the only ones taking advantage of the lower rates in droves are those looking to refinance mortgages. The Mortgage Bankers Association says refinance applications were up 30 percent for the week ended Aug. 5.
But with stricter lending guidelines, even these homeowners are struggling to take advantage of the rates, leaving most involved in the housing market at an unfortunate disadvantage.
