The lowest mortgage rates ever were reported this week on
15-year fixed-rate home loans, while 30-year mortgages fell back to
within a whisker of their all-time lows.
Average interest rates on 15-year fixed-rate mortgages dropped
to an all-time low of 3.13 percent this week, according to survey
results from Freddie Mac, down from 3.17 percent previously. That's
just below the all-time Freddie Mac record of 3.14 percent set at
the beginning of February.
Meanwhile, interest rates on 30-year fixed-rate mortgages fell
to 3.88 percent, down from 3.90 percent last week and just above
the all-time low of 3.87 percent where they had recently been
Average initial rates on 5-year adjustable rate mortgages (ARMs)
were dropped to 2.81 percent, down from 2.83 percent previously.
The record low of 2.80 percent was reached two weeks ago.
Record rates sticking around
Mortgage rates have remained unusually stable in recent months,
hovering at or near all-time lows. Average interest rates on
30-year mortgages, for example, have not exceeded 4 percent since
late October, according to Freddie Mac's calculations (other
surveys may show different results based on different methods for
gauging national mortgage rates).
The combination of rock-bottom mortgage rates and housing prices
means that a typical family had more than twice the income required
to buy a mid-priced home in January, according to Freddie Mac chief
economist Frank Nothaft.
Nothaft noted that the National Association of Realtors Housing
Affordability Index, a combined gauge of home prices, interest
rates and incomes, reached its highest reading ever in January, in
records dating back to 1970.
Low rates, prices not driving demand
Despite very attractive home prices and interest rates,
home-buying demand among consumers remains sluggish. That is partly
due to uncertainty over the direction of the housing market and
economy, with potential buyers unwilling to take on a major
obligation like a home purchase right now.
Another factor is tight mortgage credit. Although lenders are
making mortgage loans, higher down payment requirements, which
typically call for a minimum of 10 percent down, are keeping many
younger consumers out of the homebuying market despite income
levels that would otherwise qualify them for a mortgage.
As a result, FHA mortgages, which requires as little as 3.5
percent down, have become a popular option in recent years, but the
insurance costs associated with FHA loans raise their effective
interest rate, making them less attractive to some borrowers than
they otherwise might be.