Mortgage Rates hit Record Lows for 11th Straight Week – Investors flee to Treasury Bonds

Posted by on Sep 02, 2010 | No comment

It should come as no big surprise that mortgage rates in the U.S. have dropped to another record low, representing the 11th straight week of matching its previous lows or setting a new one. One major benefit is that it reduces the borrowing costs for most homebuyers as the demand for mortgages and purchasing of homes continues to decline.

The current average rate for a 30-year fixed mortgage is 4.32%, down 4 basis points from last week’s rate of 4.36%, according to a statement released by Freddie Mac (OTCBB: FMCC) who tracks this data. This has once again topped the lists as the lowest mortgage rate since Freddie Mac began tracking rate data in 1971. In addition the less used but equally inexpensive rate for a 15-year mortgage was 3.83% from 3.86% also a new record.

Although these rates are at all-time lows, they have not boosted home sales nor increased the amount of new homes being built or new home permits being applied for. The housing industry, which is seeing its what could be its unprecedented worst consecutive years ever, has been ganged up on by increases in unemployment and the end of the federal homebuyer tax credit, which offered an $8,000 tax incentive for purchasing a home. Sales of new and previously owned homes fell to record low levels in July, as noted in several of the most recent reports by the National Association of Realtors. Also helping the slide is the investment community’s uncertainty about the economy and the subsequent move to the safety of Treasuries.

The number of contracts to purchase previously owned houses rose in July unexpectedly, showing a possible sign that the housing market may be on its way to a more stable future. However, contracts to buy homes are not a final sale and in this market often fall though due to the amount of short sales and foreclosures that either don’t meet buyers expectations, or from banks taking to long to move on the offers.

Applications for mortgages have increased by 2.8% in July and August as people who already own homes look to refinance and lower their payments. The decline in rates has spurred a surge of refinancing as Americans seek to reduce payments.

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