Mortgage rates for 30-year loans in the U.S. declined to a nine-month low today, due to slower-than-expected economic growth, further deterioration of the overall labor market, and European debt concerns.
Federal Reserve policy makers pledged Aug. 9 to keep interest rates at record lows through mid-2013 to bolster an economy that was growing “considerably slower” than they previously projected. The yield on the 10-year Treasury note, a guide for consumer loans including mortgage rates, hit an all-time low after the Fed’s announcement.
“The economy is going to remain weak for quite some time,” Paul Dales, senior U.S. economist at Toronto-based Capital Economics, said in a telephone interview. “You have to look at the impact on confidence. The big issue is the inability or unwillingness of people to borrow or buy a home.”
The 30-year, fixed-rate mortgage fell to 4.32%, its lowest point this year. That's down from 4.39% last week and 4.44% a year earlier, Freddie Mac said in its primary mortgage market survey. Today's rates are the lowest since the week ended Nov. 11, 2010 when it was 4.17 percent, the lowest in Freddie Mac records dating to 1971.
Bankrate.com also noted record lows for interest rates, saying credit rating downgrades to the country, Fannie Mae and Freddie Mac were good for mortgages and opened "the door to refinancing for homeowners that missed the chance last year."
U.S. mortgage applications surged last week, led by the
biggest gain in refinancing in more than two years, according to the
Mortgage Bankers Association. The group’s refinancing index jumped 30
percent in the period ended July 22 from the prior week. The purchasing
gauge declined 0.9 percent.
To obtain the rates, 30-year fixed-rate mortgages required an average payment of 0.7 point, while 15-year fixed rates required an average 0.7 point payment. Five-year adjustable rate mortgages required an average 0.5-point payment, while one-year adjustable rates required an average 0.5 point payment. A point is 1% of the mortgage amount, charged as prepaid interest.
“We’re going to look back in five years and see these historically low rates,” Doug Lebda, chief executive officer of Tree.com Inc. in Charlotte, North Carolina, said in a phone interview. “People are going to wish they jumped in.”