As the U.S. economy continued to show weakness, interest rates on long-term mortgages plummeted to unheard-of lows last week, according to mortgage finance company Freddie Mac.
The average rate on a 30-year fixed rate mortgage loan sank to 3.67 percent, excluding points during the week ended June 7, down from 3.75 percent the week before. This marks the six straight week of rate decreases and is also the lowest rate on record in the 40-plus year history of the Freddie Mac survey. By comparison, last year at this time, the average rate was 4.49 percent.
“Interest rates have been on a one-way elevator trip to the cellar,” said Mike Larson, housing market analyst for Weiss Research as quoted in a CNN Money article. “We have never seen rates this cheap.”
The 15-year fixed rate mortgage carried an average rate of 2.94 percent, down from 2.97 percent while the average rate on a one-year adjustable rate mortgage rose slightly to 2.79 percent from 2.75 percent the previous week.
Freddie Mac vice president and chief economist Frank Nothaft gave a laundry list of economic ills that contributed to the low rates.
“Fixed mortgage rates reached new record lows for the sixth consecutive week as long-term Treasury bond yields declined further following downwardly revised economic growth and job creation data,” he said in a press release. “Gross domestic product rose 1.9 percent in the first quarter, after originally being reported as 2.2 percent, led by gains in inventories, more government cutbacks and the slowest increase in corporate profits in over three years. In addition, the economy added 69,000 jobs in May, less than half of the market consensus forecast and revisions subtracted a total of 49,000 workers in March and April. Lastly, the unemployment rate ticked up from 8.1 percent in April to 8.2 percent.”
Even though at one point it seemed impossible for rates to reach their current lows, rates may continue in their free fall until more positive news surfaces from the economy.