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Lowest rate on 30-year mortgage

August 20, 2011

The typical rate on a 30-year fixed mortgage has fallen to its lowest level on records dating to 1971.

The rate on probably the most well-known mortgage dipped to four.15 percent from 4.32 percent a week ago, Freddie Mac said Thursday. Its prior low of four.17 percent was reached in November.

The last time long-term rates were lower was inside the 1950s, when 30-year loans weren’t widely accessible. Most long-term residence loans lasted 20 or 25 years.

Couple of anticipate record-low rates to energize the depressed home market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. But prices and sales remain unhealthy and are holding back the overall economy.

Five years ago, the average 30-year fixed rate was near 6.5 percent. In 2000, it exceeded 8 percent.

Most homeowners are paying rates more than a full percentage point higher than the existing average. The typical rate on all outstanding mortgages is 5.3 percent, Freddie Mac stated, citing information from the Bureau of Economic Analysis.

Right after previous recessions, housing accounted for 15 percent to 20 percent of overall economic growth. This time, in 2009 and 2010, housing contributed just four percent to the economy.

“The housing market just isn’t going to turn about due to this, since it isn’t the mortgage rate that matters,” said Joel Naroff, head of Naroff Economic Advisors. Naroff blamed the “horrendous” process of qualifying for a mortgage despite tougher lending standards. He said attempting to sell a home in several markets is just as difficult.

Numerous would-be buyers can’t take advantage of the low rates. The unemployment rate is 9.1 percent, couple of Americans are obtaining raises and several are struggling to shrink their debt loads.

Banks are also insisting on higher credit scores and bigger downpayments for first-time buyers. Numerous repeat buyers have too little equity invested in their homes to qualify for loans. Other people are too nervous concerning the economy or their job security to invest in a residence.

The typical rate on a 15-year fixed mortgage, which is common for refinancing, fell to three.36 percent, also a record low. It is the third straight week of record lows for the popular refinancing choice. Freddie Mac’s records date to 1991, but analysts believe the new low on the 15-year mortgage may be the lowest ever.

Borrowers who qualify have rushed to refinance and reap the benefits of the low rates. Refinancing accounted for 70 percent of mortgage applications within the very first half of the year, Freddie Mac stated. Refinancings have a tendency to offer much less benefit to the economy than property purchases do.

Mortgage rates usually track the yield on the 10-year Treasury note. Economic fears have drawn investors towards the safety of Treasurys, driving down the yield on the 10-year note to barely above 2 percent. That helped lower mortgage rates.

The Federal Reserve offered a dim outlook of the economy final week, saying it expects growth will stay weak for two a lot more years. As a result, the Fed said it expects to keep short-term rates near zero through mid-2013.

Roughly 14 million Americans remain unemployed. And the economy isn’t generating sufficient jobs to quickly trim that figure. The economy grew at an annual rate of just 0.8 percent inside the initial six months of this year, the slowest such pace given that the recession officially ended much more than two years ago. In June, consumers cut spending for the very first time in 20 months.

Fewer Americans bought previously occupied houses in July for the third time in four months, the National Association of Realtors said Thursday in a separate report. It stated sales fell three.5 percent last month to a seasonally adjusted annual rate of four.67 million houses. That’s far below the 6 million that economists say ought to be sold to sustain a healthy housing market.

To calculate typical mortgage rates, Freddie Mac surveys lenders across the country Monday via Wednesday of every week.

The typical rate on a five-year adjustable-rate mortgage fell to three.08 percent, its lowest level on records dating to January 2005. Last week’s reading of three.13 percent also was a record low. The week before was, too.

The average for one-year adjustable-rate loans fell to 2.86 percent, the lowest on records going back to 1984. Final week’s typical of two.89 also set a record.

The rates do not contain added fees identified as points. One point is equal to 1 percent of the total loan quantity.

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