30-Year Mortgage Rate Hits Another Record Low

Mortgage insurer Freddie Mac reported Thursday that the average rate for a 30 year, fixed home loan fell to an all-time low of 3.66 percent this week from an average of 3.71 percent a week ago. It’s the seventh time in eight weeks that the average 30-year rate has dropped to its lowest level since the mortgage type debuted in the 1950s. Mortgage rates have combined with a continuous flood of cheaply priced, distressed properties to create some of the most affordable homebuying conditions ever, but a weak labor market and overall economic uncertainty have prevented home sales from improving enough to fuel the recovery.

The average rate on a 15 year fixed loan, commonly utilized for refinance loans, fell to 2.95 percent this week, Freddie also reported, just above the all-time low of 2.94 percent set two weeks ago. Economists say that a surge in refinancings would benefit the broader economy by putting more money in homeowners’ pockets, allowing them to increase their spending. But despite the low interest rates, home sales are still at anemic levels. In a separate report issued Thursday, the National Association of Realtors said that existing home sales fell in May to a seasonally adjusted annual pace of 4.55 million, well below the pace of 6 million associated with a healthy market.

One factor hindering home sales is the standards by which banks are approving home loans. Beaten down by the housing crash and ensuing difficulty through the recession, lenders are requiring higher credit scores than ever as well as down payments as high as 20 percent, leaving many Americans interested in buying unable to do so. Interest rates are influenced by the yield on the 10-year Treasury note, which has been declining for months as investors pull money out of the stock market to invest in the relative safety of bonds. Rates will likely continue to fall with the Fed’s announcement on Wednesday that it is extending Operation Twist, a program in which the central bank swaps out short-term securities on its balance sheet for longer-term assets in an attempt to keep long-term interest rates down.