According to Gregory Bull with the Associated Press, average fixed-rate mortgages dropped again to record lows, giving more incentive to perspective home buyers. Freddie Mac says the average rate on a 30-year mortgage loan fell to 3.56%, down from 3.62% two weeks ago. It hasn’t been this low since long-term mortgages begain in the 1950′s. Additionally, the average rate on a 15-year mortgage dropped to 2.86%.
The falling interest rates have produced a small uptick in the housing market. Home sales were up in May from the same month last year and homebuilders started more projects.
In spite of the record low mortgage interest rates and slight increase in home sales, the housing market still remains sluggish and below healthy levels. This could be due to the fact that the unemployment rate still remains high and many people are having a hard time qualifying for these home loans or can’t afford larger down payments required by the banks.
U.S. employers added only 80,000 jobs in June, a third straight month of weak hiring. The unemployment rate was unchanged at 8.2%, the government reported last week.
Slower job creation has caused consumers to pull back on spending.
Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. A weaker U.S. economy and uncertainty about how Europe will resolve its debt crisis have led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.
To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.
The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.
The average fee for 30-year loans was 0.7 point, down from 0.8 point last week. The fee for 15-year loans also was 0.7 point, unchanged from the previous week.
The average rate on one-year adjustable rate mortgages rose to 2.69% from 2.68% last week. The fee for one-year adjustable rate loans slipped to 0.4 point, down from 0.5 point.
The average rate on five-year adjustable rate mortgages dropped to 2.74% from 2.79% last week. The fee was unchanged at 0.6 point.