The average on a 30-year fixed mortgage fell to 4.01 percent from 4.09 percent this week, Freddie Mac said Thursday. That’s the lowest rate since the mortgage buyer began keeping records in 1971. The last time long-term rates were lower was in 1951, when most long-term home loans lasted just 20 or 25 years.
The average on a 15-year fixed mortgage, a popular refinancing option, ticked down to 3.28 percent. Economists say that’s the lowest rate ever for the loan.
Mortgage rates tend to track the yield on the 10-year Treasury note. The 10-year yield has risen this week to around 2 percent. A week ago, it touched 1.74 percent — the lowest level since the Federal Reserve Bank of St. Louis started keeping daily records in 1962. As recently as July, the 10-year yield exceeded 3 percent.
Rates on mortgages could fall further after the Federal Reserve announced last week that it would take further action to try to lower long-term rates.
Still, low rates have so far done little to boost home sales or refinancing. Many would-be buyers or homeowners don’t have enough cash or home equity to get a new loan.
High unemployment, scant wage gains and debt loads represent a heavy burden for many people. Others can’t qualify. Banks are insisting on higher credit scores and 20 percent down payments for first-time buyers.
This year is shaping up to be among the worst for sales of previously occupied homes in 14 years. Few are buying, even though the average rate on the 30-year fixed mortgage has fallen to around 4 percent.
A drop in mortgage rates could provide some help to the economy if more people could refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.
Consider a homeowner who owes $250,000 and is paying 5.09 percent on a 30-year fixed mortgage. That was the average rate being offered in January 2010. Refinancing the loan at 4.01 percent could save him or her roughly $2,000 a year.
But many homeowners with good jobs and stable finances have already refinanced over the past year as rates have fallen. The average rate on the 30-year loan fell to new lows in November, August and again this month.
Homeowners also typically pay a few thousand dollars in closing costs when they refinance. And the low rates being offered don’t include extra fees, which many borrowers must pay to get the rates. Those fees are known as points; one point equals 1 percent of the loan amount.
The average fee for the 30-year held steady at 0.7; for the 15-year, it rose to 0.7. The average fee for both the five-year and one-year adjustable-rate loans was unchanged at 0.6 point.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday of each week.
The average rate on a five-year adjustable-rate mortgage was unchanged at 3.02 percent. The average for the one-year adjustable-rate mortgage ticked up to 2.83 percent.