By Mike Colpitts
The lowest mortgage rates in history pushed refinancing to a three year high as consumers cashed in on lower loan payments, according to the Mortgage Bankers Association survey, which accounts for 75% of all U.S. home loan activity.
The bankers’ market composite index, however, rose just 0.9% as purchase money mortgages increased just 3.0% for the week. Refinances rose 2.0% from the previous week on an adjusted basis as homeowners refinanced mortgages to gain the lowest rates possible. The average fully contracted mortgage rate on a 30-year fixed loan on a conforming conventional mortgage remained at 3.74% for the second week in a row.
The Freddie Mac average for the same loan hit 3.53% last week, but most consumers are unable to qualify for the lowest rates available because of a ding or two on their credit. However, the same 30-year fixed rate loan backed by the federal government’s FHA program fell to 3.52% for the week, the lowest rate in the history of the banker’s survey.
The average contract mortgage rate on a 15-year fixed rate signed by loan borrower’s dropped to 3.07%, the lowest on record on 80% loan-to-value loans. The average rate for 5/1 adjustable rate mortgages decreased to 2.68%, also the lowest in the history of the survey.
Mortgage rates have been on a downward slide since disturbing news about the U.S. economy made headlines, and unemployment averaged above 8.0% on average throughout the country.
U.S. Treasuries, which are customarily tracked by bankers who set mortgage borrowing rates, have been under 1.45% all week, keeping an uncertain air over markets. Treasuries are the single biggest factor banks look at to set mortgage borrowing rates.
Worries over the European debt crisis also continue to trouble financial markets. Should Spain have further problems, mortgage rates are expected to fall even further as world financial markets become even more destabilized.