Mortgage Rates Stay Near Record Lows

By:: Kara Johnson | September 01, 2011

Mortgage rates remained at or near all-time lows this week, as weak economic reports eased pressures that could have pushed them upward.

Initial rates on 5-year Treasury indexed adjustable rate mortgages (ARMs) fell to a new record low for the fifth consecutive week, according to the weekly Freddie Mac rate survey, dropping to an average of 2.96 percent, down from 3.07 percent last week. Interest rates on 30-year fixed-rate loans held steady at 4.22 percent, while 15-year fixed-rate mortgage dropped to 3.39 percent, down from 3.44 percent previously.

Mortgage Demand remains soft despite low rates

The low rates either haven’t generated much reaction from consumers. Yesterday, the Mortgage Bankers Association (MBA) reported that applications to refinance existing mortgages fell a seasonally adjusted 12.2 percent last week. Refinance applications are up only 4.2 percent over the past four weeks, despite all three major mortgage types falling to record lows during that period.

Applications for home purchase mortgages have been even weaker, falling a seasonally adjusted 1.3 percent last week and 3.8 percent over the past month. Purchase applications last week were 8.2 percent compared to the same week one year earlier, despite the fact that home sales in August 2010 were still depressed by the recent end of the homebuyer tax credit program.

Refinance applications presently make up nearly four out of five mortgage applications, according to the MBA, although it is not clear how many of those are approved.

Weak economy tied to rate trends

Frank Nothaft, Freddie Mac chief economist, attributed the downward trend of this week’s rates to a number of economic factors, including reports this week that the economy grew at a lower-than-expected rate in the second quarter of the year and falling consumer confidence in August.

Also this week, the Standard & Poor’s/Case Shiller Home Price Indices showed that the annual rate of decline in home prices worsened in the second quarter of the year, while the National Association of Realtors announced that pending home sales fell slightly in July, their first decline in three months.

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Loan Type	Today	+/-
30 yr fixed	3.72
15 yr fixed	3.03
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