By Mike Colpitts
Mortgage rates hit a new record low as economic volatility on Wall Street pushed rates down to hit a new average of 4.15% on a 30-year fixed rate mortgage, according to Freddie Mac. The rate is lower than 4.17% last November, which ushered in a wave of home buying and refinancing activity.
The drop in mortgage rates set by banks and mortgage lenders couldn’t come at a better time as the housing market struggles to recover from its slump in the midst of summer, which is usually the busiest home buying season of the year.
The 15-year fixed rate mortgage also dropped to a new record low, reaching an average of 3.36%, down from last week when the loan was 3.50%. The historic drop in mortgage rates could drive another round of heavy refinancing activity and home sales.
“The Federal Reserve’s policy statement last week and ongoing market concerns over the European debt market carried momentum into this week allowing all mortgage products in our survey to reach all-time record lows,” said Freddie Mac chief economist Frank Nothaft.
“For instance, 30-year fixed mortgage rates are now the lowest in over 50 years. Not surprising, many homeowners took advantage of this low mortgage rate environment and have already refinanced their loans. The refinance share of applications averaged nearly 70% of all mortgage activity in the first half of this year, according to our survey. “
The 5-year Treasury indexed hybrid adjustable rate mortgage also saw a mortgage rate drop for the week, hitting an average of 3.08% this week across the U.S., according to Freddie Mac. The rate took a drop of five basis points from last week. The 1-year Treasury ARM averaged 2.86%, down a slimmer 0.03 from the prior week.
The historic drop in rates comes just weeks before many children return to school for the new school year in the west and north-eastern sections of the country, which may give more families the incentive needed to look for a new home before the start of the school year.
Many school districts, especially public elementary and high schools have already started classes in southern states. The housing market is struggling to pull out of the doldrums and record low rates on mortgages can’t do anything but help the marketplace.