Wednesday, September 14, 2011

Mortgage rates fall to lowest level since 1950s, few qualify

WASHINGTON – Fixed mortgage rates fell this week to the lowest levels in six decades.
  • Construction workers at a home site in Media, Pa.,
    By Alex Brandon, AP
    Construction workers at a home site in Media, Pa.,
By Alex Brandon, AP
Construction workers at a home site in Media, Pa.,
But few Americans can take advantage of the rates to refinance or buy a home.
The average rate for a 30-year fixed mortgage fell to 4.12%, from 4.22%, Freddie Mac said Thursday. That's the lowest level on records dating back to 1971.
Freddie Mac says the last time rates were cheaper was 1951, when most home loans lasted just 20 or 25 years.
The average rate on a 15-year fixed mortgage, a popular refinancing option, fell to 3.33% from 3.39%. That's the lowest on records dating to 1991 and likely the lowest ever, according to economists.

National Mortgage Rates

30 yr fixed mtg4.15%
15 yr fixed mtg3.36%
5/1 ARM2.95%
$30K home equity loan6.07%
$30K HELOC4.68%
About these rates
Mortgage rates tend to track the yield on the 10-year Treasury note, which fell to an all-time low this week. An uncertain outlook for the U.S. economy has led many investors to shift money out of stocks and into the safety of Treasury securities, lowering the yield.
When demand pushes up bond prices, yields fall.
Still, few expect record-low rates to energize the depressed home market. Over the past year, the average rate on 30-year fixed mortgages has been below 5% for all but two weeks. That compares with five years ago, when the average 30-year fixed rate was near 6.5%. Yet sales remain unhealthy and are holding back the economy.
Sales of new homes are on pace to finish the year as the lowest on records dating back a half-century. The pace of re-sales is shaping up to be the worst in 14 years.
Many Americans can't take advantage of the rare confluence of low home prices and record low mortgage rates. Some are in no position to buy. Unemployment is high, few are getting raises and many are struggling to shrink their debt.
Others can't qualify for the lowest rates. Banks are insisting on credit scores above 700 and 20% down payments for first-time buyers. Many repeat buyers have too little equity in their homes to meet loan requirements.
Roughly 40% of U.S. households have the necessary credit scores to get a prime mortgage rate, according to an Associated Press analysis of Fair Isaac, or FICO, data. But that's not the chief reason people aren't buying homes or refinancing.
Just half of Americans say they'll ever be able to save enough money for any type of down payment, let alone 20%, according to a survey by the National Foundation for Credit Counseling.
Nearly a third of homeowners have nearly zero equity in their homes or are underwater on their mortgage, owing more than the house is now worth, according to the real estate research firm CoreLogic. That leaves then unable to refinance because of lender-imposed limits and the cost of extra fees.

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