Investors continued to flee to the security of U.S. Treasury bonds this past week, pushing long-term mortgage interest rates down again to new record lows, according to mortgage finance company Freddie Mac.
The average rate on a 30-year fixed rate mortgage, excluding fees, fell to 3.78 percent during the week ended May 24, down from 3.79 percent, the previous all-time low. The current rate is the lowest on record for Freddie Mac’s 41 years of rate surveys. The average rate on a 15-year fixed rate loan held at its current record low of 3.04 percent.
Treasury yields have been pushed down as investors have worried about the European debt crisis, which has in turn pushed interest rates lower. Long-term rates have been at or near record lows for several years now. The last time the 30-year fixed rate mortgage carried an average rate above 6 percent was back in November 2008.
These low rates are helping to ease the housing market out of its doldrums.
“Low mortgage rates are playing an increasingly important support for the housing market,” said Keith Gumbinger, vice president of HSH.com, as quoted in a Business Week article.
For example, the Commerce Department reported last week that sales of new U.S. homes rose 3.3 percent in April from the month before and the National Association of Realtors found that existing U.S. homes sales grew 3.4 percent during the same time period.
What’s more, refinance loans have become much more popular with homeowners as a result of record low rates. The Mortgage Bankers Association recently revised its projections up by $200 billion for total refinance dollars in 2012, predicting a level of $1.28 trillion now by the end of the year.
“Scenarios we have consistently highlighted that could drive rates down and refis up have materialized, primarily due to market turmoil in Europe,” said Mike Fratantoni, MBA’s Vice President of Research in a press release. “Deterioration of the debt situation in Spain and Greece and a new regime in France that is a weaker proponent of European austerity, along with slower economic growth globally, have driven the US Ten Year Treasury yield down. Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result.”