By Mike Colpitts
U.S. Treasury bonds hitting their lowest levels in all-time history sent mortgage rates to record all-time lows again this week. The 30-year fixed rate mortgage dropped to an average of 3.75% in the Freddie Mac survey. It was the fifth straight week that mortgage rates hit new record all-time lows.
The rate of the 10-year Treasury bond hit 1.629% in Wednesday afternoon trading, the lowest the benchmark security has reached in the history of trading in financial markets. The drop in Treasury rates and indexes in other financial markets is being triggered by financial uncertainty in Europe.
“Concerns over tensions in the Eurozone led to a decline in long term Treasury bond yields helping to bring fixed mortgage rates to new record lows,” said Freddie Mac chief economist Frank Nothaft. “Compared to a year ago, rates on 30-year fixed rate mortgages are almost 0.9 percentage points lower.”
The lower rates are driving some consumers to refinance home mortgages, and especially first time buyers to enter the housing market. Home prices in most areas of the country, however, continue to decline amid concerns over the greater U.S. economy.
The fixed 15-year mortgage also dropped to a new record low, hitting 2.97% with an average 0.7 point for borrowers seeking the shorter term mortgage. Last week the same loan was 3.04%.
The 5-year adjustable rate mortgage rose a single basis point in the Freddie Mac survey, to 2.84% for the week from the prior week. However, only about 5% of all borrowers applying for home loans these days are opting for adjustable rates since fixed loans are so low. The 1-year ARM remained unchanged for the week at 2.75%.