US Mortgage Rates at 40-50 Yr Lows Fail to Tempt Buyers
09 September 2011
US mortgage rates fell to the lowest in 40 years as investors turned to government bonds on fears of the deepening European debt crisis, and stagnant job growth. According to government owned lender Freddie Mac the average rate for a 30 year fixed mortgage dropped to 4.12 this week, from 4.22 percent, the lowest rate since the company opened trading in 1971.
According to data from the National Bureau of Economic Research long-term borrowing is actually at its lowest cost since the 1950s. Meanwhile the average 15-year rate fell to 3.33 percent from 3.39 percent. But buyers are not responding to the low rates, and the housing market is still far from recovery according to widespread reports.
"Homebuyers are not responding to these record-low interest rates," said Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts. "The reason interest rates are dropping recently is that the outlook for the economy has gotten weaker. A smart person would be very careful about buying a home unless he thinks his job is very secure."
Mortgage applications dropped 4.9 percent in the week ended Sept. 2, according to data from the Mortgage Bankers Association.
The continued failure of the housing market, combined with a Labour Department report of no new jobs in August, signs that the US economic recovery is stalling and Europe's continued failure to contain its debt contagion led to another all time low as yields on 10 year treasury bonds also plumbed new depths this week.