The average rate on a 30-year fixed rate U.S. mortgage fell to below three-and-a-half percent this week, for the first time in recorded history, according to mortgage finance company Freddie Mac, and they may continue to go even lower.
During the week ended July 26, the 30-year conventional mortgage loan carried an average rate of 3.49 percent, excluding points, down from 3.53 percent the week before. That is also down more than a full percentage point from the same week in July 2011 when it was 4.55 percent.
Rates on 15-year mortgages also found a new low, falling to 2.80 percent, excluding points, from 2.83 percent the previous week. Last year at this time, the average rate was 3.66 percent.
The one-year adjustable rate mortgage averaged up to 2.71 percent, from 2.69 percent one week earlier and 2.95 percent one year ago.
The continual downward spiral of mortgage rates is due mainly to the sour notes of the world and domestic economies.
“Market concerns over the strength of the economic recovery brought long-term Treasury yields to new lows this week allowing fixed mortgage rates to reach record levels,” said Frank Nothaft, Freddie Mac vice president and chief economist said in a statement.
As investors worry about the economy they seek the safety of U.S. Treasury bonds and those generally push down mortgage rates. Nothaft pointed specifically this week to decline in the Conference Board Leading Economic Index, which saw its largest monthly drop in June in almost a year. Sales of both existing and new homes also fell in the latest reports.
And as crazy-low as mortgage rate are now, there is the possibility for an even greater decline. Certainly any more poor economic news could bring them down, but particularly important for rates is a Federal Reserve meeting next week. If the Fed decides it need to offer more stimulus to the economy, rates could definitely reach fresh record lows.