By Mike Colpitts
All-time record low mortgage rates have become old news lately, but rates on conventional mortgages and most adjustable loans hit new record territory again this week as U.S. Treasuries fell. The 30-year fixed rate home loan reached an average of 3.56%, down from 3.62% just a week ago.
The 15-year fixed rate mortgage also sank to a new record low, hitting 2.86%, a three basis point decline from last week. Lower rates paid to investors on Treasury bonds were the main motivator behind the lower rates, but on-going economic troubles in the U.S. and abroad are also driving lending rates lower.
The monthly unemployment report contributed to the drop. The average U.S. unemployment rate remained at 8.2% reported by the Commerce Department as employers shed jobs and resist hiring new workers. Only 80,000 new jobs were added last month, far less than what most economists consider to be healthy. Most economists feel that at least 400,000 jobs a month would have to be added in order for the economy to be in better condition.
The lack of jobs greatly holds back a full recovery in the U.S. housing market since those without jobs don’t qualify for a mortgage, and don’t otherwise contribute to the economy financially.
“Following a lackluster employment report for June, long-term U.S. Treasury bond yields eased somewhat this week allowing fixed mortgage rates to reach yet another record low,” said Freddie Mac chief economist Frank Nothaft. The 10-year Treasury averaged around 1.51% much of the week, keeping many investors at bay.
It’s hoped that lower rates will eventually produce a full recovery in housing, which has seen lackluster sales even with the record lows. But sales are ahead of last year’s pace and show more evidence of improving over the summer. Many buyers who are on the fence about making home purchases seem to be coming out to open houses more often, and new home developments to begin shopping for homes.
The 5/1 ARM also fell to new record territory, reaching 2.74%, down five basis points from a week ago. The 1-year Treasury indexed adjustable averaged 2.69%, up a single basis point from last week. However, few consumers ever pick the short term product as their mortgage choice with fixed rate loans at record lows.