No bottom in sight for home loan rates

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(MoneyWatch) Fixed mortgage rates have tumbled to new lows. According to Freddie Mac's latest Primary Mortgage Market Survey, the average rate on 30-year fixed loans has been below 4 percent for 16 weeks. The average 15-year fixed has been below 3 percent for seven weeks.

A disappointing jobs report and continually stagnant economy appears to be keeping a lid on rates. Average rates for the week ending June 12 are as follows:

• The average interest rate for a 30-year fixed-rate mortgage was 3.56 percent, down from last week when it averaged 3.62 percent. One year ago, the average 30-year FRM was 4.51 percent.

• A 15-year FRM averaged 2.86 percent, down from last week's average of 2.89 percent. At this time last year, the 15-year FRM averaged 3.65 percent.

• 5-year Treasury-indexed hybrid adjustable-rate mortgages averaged 2.74 percent, down from last week when it averaged 2.79 percent. A year ago, the 5-year Treasury-indexed ARM averaged 3.29 percent.

• The 1-year Treasury-indexed ARM averaged 2.69 percent, up slightly from last week's rate of 2.68 percent. In the year-ago period, the 1-year ARM averaged 2.95 percent.

"Last week, rates were pushed to another all-time low by the worse-than-expected employment report on Friday," said Erin Lantz of real estate listing company Zillow, in a statement. "This week, rates should remain fairly flat with limited scheduled news to alleviate U.S. and European concerns."

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"Following a lackluster employment report for June, long-term U.S. Treasury bond yields eased somewhat this week, allowing fixed mortgage rates to reach yet another record low," said Frank Nothaft, vice president and chief economist for Freddie Mac, in a news release. "Only 80,000 net new jobs were added to the economy last month, not enough to lower the unemployment rate from 8.2 percent."

The low rates reflect the fragile state of the economy, Lantz added, while describing the opportunity to refinance or get a new mortgage at low rates a "silver lining" for borrowers.

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[matt6052]

Remember the interplay between interest rates and home values. Each time the interest rate drops, home prices get a nudge upward. That sounds good, except that soon enough interest rates will have nowhere to go except up-- and that means downward pressure on home prices. And many people are still under water from the 2008 collapse.

[monikadab]

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[buff24seven]

Purchase Price: $189,900 Down Payment: $37,980
Mortgage Amount: $151,920 Mortgage Term: 30 years
Interest Rate: 3.00% Monthly Payment: $640.50
Total Payments: $230,580 Total Interest: $78,660

you would have to be a idiot to accept that loan in this market let me get this straight you lat me borrow 150,000 but you want 80,000 dollars for giving me the money?

[knewsteerrrrr]

If the rate goes any lower it wont be long before they start paying YOU to take a loan out!

[Jhihmoac]

If you're one of those lucky enough to have steady and gainful employment, a superb credit history, and a sizeable down payment - this is all a dream come true...

[buff24seven]

this is not a dream come true 150,000 dollar loan at 3% interest for a 30 year mortgage is still 80,000 dollars the bank just robbed from you the only way i'm buying a home is if the rate drops to 1% them maybe just maybe ill think about buying.

[tmittelstaed]

you can get a 30 year fixed and simply double your monthly payment if you want to pay at a lower interest rate. Figure it out.

[hypnotoad72]

Or the bottoming out of home values...

Or wages that allow people to buy homes at 30yr mortgages...

Or jobs that last longer than 5 years since the reason for a home it so build and raise a family and then retire in it, but since it's now another disposable commodity... try selling a home in this 'market', especially if you have to get another job and the only one available is a thousand miles away...

Details - like facts, I wish they were useless things...

[rwsmith29456]

This is good IF people buy affordable houses at the right price instead of gambling on getting their 'dream home'.

[hypnotoad72]

It's not as simplistic as that dream you just outlined.

[vsmit]

So Hypo, the concept of buying what you can afford is "simplistic"?

[Molly-Pchr]

Because home values are still in decline, and if you listen to reports carefully, you will see it hasn't bottomed out, and some "experts" say we have another 20% or so to go before it bottoms out. Poor folks with those big mortgages, my goodness, losing money hand over fist. No wonder they're leaving the keys and walking away.

[hypnotoad72]

Agreed.

And some are still trying to do the right thing and hold out as long as possible, while still trying to sell.

Always do the right thing when possible, but those who walk - it's not my business to judge. Or anybody's. In "the new normal" that, as my direct response above alludes to, it's increasingly pointless TO own a house. Unfortunately... speculators and other venture capitalists did help to create this mess, though there are plenty of factors involved. Cause vs symptom, a late-teen doing construction work for $15/hr getting a loan for $750k back in 2003 or whenever - that's jaw-droppingly bad. Still, was the kid greedy or did the bank slide loose with details and acting 'reassuring'... and basic ethics, would either of us be so quick to lend under that circumstance? What would we, as lenders, have to endure to be so quick to make such loans...

[vsmit]

Hypo, it is the speculators and other venture capitalists who are pushing UP home prices. If they were not in the market, prices would be even lower.