photo credit: woodleywonderworks
In mid-August of this year, rates on a 30-year fixed mortgage had fallen to its lowest since 1971. Freddie Mac reported that the rate on one of Americas most popular mortgage dropped to 4.15 percent, down from 4.32 percent just a week previous. July 2011 was the third month of Americans buying homes that were previously occupied. The National Association of Realtors says sales fell 3.5 percent in July, resulting in a seasonally-adjusted annual rate of 4.67 million homes quite a bit less than the six million homes that need to be sold to keep the housing market at a "healthy" level.
Long-term mortgage rates havent been this low since the 1950s. Not many experts think these low rates will help to stimulate the housing market. Several homeowners in the country pay rates that are "more than a full percentage point higher than the current average." The Bureau of Economic Analysis, cited by Freddie Mac, reports that the average rate on all existing mortgages is now at 5.3 percent. In past recessions, the housing market made up 15-20 percent of the countrys economic growth. But this time around, its only accounted for four percent of the economic growth.
Average rates on a 15-year fixed mortgage (used mostly for refinancing) dropped to 3.36 percent. This is also a record-low. Analysts argue that this is the lowest-ever rate on such a mortgage. During the first half of 2011, refinances made up a whopping 70 percent of loan applications, according to Freddie Mac. Refinances dont lend much benefit to bolstering our economy like purchases do. The Federal Reserve expects the countrys economic growth to remain slow for at least two more years. Because of this, the Fed expects to make sure short-term mortgage rates stay close to zero all the way through 2013.
