In another record-breaking drop, the average interest rate on 30-year fixed-rate mortgages (FRMs) fell below the 5 percent mark for the first time in history according to mortgage finance company Freddie Mac Thursday.
The 30-year FRM rate sank to 3.94 percent, excluding fees, during the week ending on October 6, down from the previous all-time low of 4.01 percent the week before. One year ago, the average rate was 4.27 percent.
Rates on 15-year FRMs hit new lows as well, sinking to 3.26 percent from 3.28 percent the previous week. One year ago it was 3.72 percent. One-year adjustable rate mortgages carried a higher rate though moving up to 2.95 percent from 2.83 percent.
“Average 30-year conventional fixed mortgage rates fell below 4 percent for the first time in history this week following a sharp drop in 10-year Treasuries early in the week as concerns over a global recession grew,” said Freddie Mac’s vice president and chief economist Frank Nothaft in a press release. “…Interest rates for one-year ARMs, however, rose, as the Fed began replacing $400 billion of its short-term Treasury securities, which serve as benchmarks for many ARMs.”
He also cited Federal Reserve chief Ben Bernanke’s recent comments as adding to the downward rate pressure by investors. Speaking to Congress about the Fed’s new plan to sell off short-term debt and buy more long-term bonds Bernanke said,
“It should help, somewhat, on job creation and growth. It’s particularly important now that the economy is close, the recovery is close to faltering.”
While rock bottom interest rates should be helpful in stimulating the barely-breathing housing market, there are limited numbers of people who can take advantage of them. Mortgage lending standards remain so tight that many do not qualify for home purchases or refinances. Refinancing is not even an option for most of the 11 million U.S. homeowners who owe more than their homes are worth.
As Mark Goldman, a Southern California mortgage broker who lectures at San Diego State University told the Washington Post. “It’s tough to refinance a loan these days. Only the select few can qualify.”