By Kevin Chiu
Mortgage interest rates dropped to the lowest levels since last 
November on signs that the U.S. economy is weakening further, and is likely to move into another official government defined recession. The housing market in many states throughout the country is already dealing with an economic depression, and has been for more than four years.
The average rate on a 30-year fixed rate mortgage with 0.8 point for the week was 4.39%, down from an average of 4.55% a week ago, according to Freddie Mac. The fixed 15-year rate loan also saw a drop to an average of 3.54%, a new historical low for the mortgage down from last week when it was at 3.66%.
The 5-year Treasury indexed hybrid adjustable rate mortgage hit an average of 3.18% for the week, down from 3.25% last week to also hit a new record low. A year ago the same ARM averaged 3.63%.
The sudden drop in rates came after Congress reached a deal on the U.S. budget deadline fearing an economic collapse. Treasury bond yields reached the lowest levels since last November in the aftermath of the fallout, hitting 2.62% Wednesday on the benchmark 10-year Treasury.
Lower Treasury rates are usually viewed as unfavorable by financial markets since investors see U.S. Treasury bonds as a safe haven to invest their money. But with the lowest rates in years Treasuries are usually expected to send home mortgage rates higher. The adjustment could develop sending interest rates higher as the nation’s economy struggles to cope with economic troubles surrounding the U.S. debt and the direction of the economy.
Mortgage rates are also being kept low by the Fed’s fiscal policy, keeping their bank lending rate at or near 0 in an effort to drive the U.S. economy out of its downturn. However, with fewer people able to qualify for home mortgages due to restrictive mortgage underwriting standards, the low rates are of little help to many consumers looking to buy a home or refinance their current houses.
“Treasury bond yields fell markedly after signs the economy was weaker than what markets had previously thought,” said Freddie Mac chief economist Frank Nothaft. The first six months of the year was the worst six months since the government said an economic recovery began in June of 2009.
“On a positive note there were indications that the housing market is firming,” said Nothaft, despite the fact that there are more than 4-million vacant homes in the U.S. awaiting foreclosure. “Real residential fixed investments added growth to the economy in the second quarter after subtracting from growth over the first three months of the year.”