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Mortgage Rates Drop Below 4% for First Time

Mortgage rates slammed into a new, record-setting low Thursday, with mortgage giant ""Freddie Mac"":http://www.freddiemac.com/ reporting that figures for the benchmark 30-year fixed-rate mortgage fell below 4 percent for the first time in history. Finance Web site ""Bankrate.com"":http://www.bankrate.com/ noted a similarly record-smashing low for the loan.


Freddie and Bankrate.com released weekly surveys to yield the results for this week.

Making the biggest waves, the GSE found the 30-year loan dropping on average to 3.94 percent nationally, down from 4.01 percent last week and 4.27 percent over the same time last year.

This marks the first time that Freddie saw the benchmark mortgage hitting lows below 4 percent.

Bankrate.com also a reported a new record, seeing the 30-year loan fall only to 4.21 percent, down from 4.30 percent last week.

The Finance Web site saw a slide in 15-year fixed-rate mortgages from 3.47 percent last week to 3.46 percent this week, with 5-year and 1-year adjustable-rate mortgages (ARMs) hitting a 3.11-percent stride, inching below 3.13 over the same period.


Freddie departed from the findings by again seeing record lows for the 15-year loan, with interest rates falling to 3.26 percent this week from 3.28 percent last week.

The GSE recorded a 2.96-percent average for the 5-year ARM, a few percentage points down from 3.02 percent last week, and a 2.95-percent average for the 1-year ARM this week, down from 2.83 percent last week.

Speaking with _MReport_, ""Frank Nothaft"":http://www.freddiemac.com/bios/exec/nothaft.html, VP and chief economist with Freddie, cites action from the ""Federal Reserve"":http://www.federalreserve.gov/ and investors fleeing euro zone markets as dual forces contributing to ""incredibly low"" mortgage rates.

He specifically highlights the $400-billion buy-up in short-term Treasury debt by the Federal Reserve and doubts about whether bigger euro zone economies will bail out their faltering neighbors.

Asked whether record lows for the benchmark 30-year will help stimulate demand, he says that it helps but that low consumer confidence, fears about a double-dip recession, and a wait-and-see approach to still-falling home prices keep first-time homebuyers on the sidelines.

""There's not strong demand for credit in the housing market and that's tending to keep a lid on borrowing costs,"" ""Sal Guatieri"":http://www.bmonesbittburns.com/economics/profiles/sguatieri/, a senior economist with ""BMO Capital Markets"":http://www.bmocm.com/, tells _MReport_.

He faults job security and tight credit supply for the slow tread among consumers, and says low mortgage rates ""will inspire some first-time buyers to enter the market and repeat buyers to buy a bigger house, but we need to see stronger job growth and some easing in lending standards, and some work on the parts of households in paring down their debts.""

When will mortgage rates rise again?

According to Nothaft, consumers and market watchers should expect to ""see long-term yields remain extraordinarily low for the next few weeks and months,"" with interest rates for loans staying below 5 percent for the remainder of the year into 2012.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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