Interest rates on long-term mortgage loans fell to a new all-time record low this week, according to mortgage finance company Freddie Mac, as investors responded to troubling economic news.
The average rate on a 30-year fixed rate loan, excluding points, dropped to 3.87 percent, the lowest rate on record in Freddie Mac’s 40-plus year mortgage survey. Last week, the average rate had jumped to 3.98 percent up from the previous week and former low of 3.88 percent. Rates have averaged under 4 percent now for about three months, marking an historic period of exceptionally low interest rates. Last year at this time, for example, 30-year fixed rate mortgages carried a rate of 4.81 percent, almost a whole percent higher.
The 15-year fixed rate mortgage also found a new low, with the average rate falling to 3.14 percent from 3.24 percent the week before. Last year, the rate was 4.08 percent.
“Most mortgage rates eased to all-time record lows this week as fourth quarter growth in the economy fell short of market projections,” said Freddie Mac vice president and chief economist in a statement. “The Gross Domestic Product rose 2.8 percent in the final three months of 2011, below the market consensus forecast of 3.0 percent, while consumer spending in December was flat.”
He hinted that there may still be signs of a reviving housing market though.
“One bright spot, however, was that fixed residential investment increased for the third consecutive quarter and residential construction spending rebounded in December, rising 0.7 percent.”
Mortgage interest rates are expected to remain near historic lows throughout the year, influenced heavily by the Federal Reserve’s decision to keep its target rate near zero and its commitment to buy mortgage-backed bonds to keep rates from rising.
The question remains whether consumers will be able to take advantage of these rates, with tightened lending standards in place and with the continued uncertainty of the job market.