Freddie Mac reported Thursday that fixed mortgage rates fell to a new record low for the second straight week amid the Federal Reserve’s stimulus plan (spending $40 billion a month to buy mortgage-backed securities) and “indicators of a weakening economy.”
According to the report, the average rate in October on the 30-year loan dropped to 3.36 percent. That’s down from last week’s rate of 3.40 percent, which was the lowest since long-term mortgages began in the 1950s.
Interest rates for shorter term loans fell as well, with average rates for 15-year fixed-rate mortgages well below 3 percent at 2.69 percent. A year ago, rates were around 3.26 percent.
With the dropping rates, economists are betting home buyers will now have confidence to pay more for homes which, according to the closely watched S&P/Case-Shiller national home price index, have rebounded to the same level they were nine years ago.
“It’s at least a 60-year low in mortgage rates,” says Frank Nothaft, vice president and chief economist at Freddie Mac. “That’s translated into more housing demand and that’s one reason the Fed has been so aggressive in focusing on mortgage rates.”
Despite the astonishingly low rates, ABC notes that it’s still extremely difficult to get a loan as 40 percent of all refinancing applications fall apart.
According to the Mortgage Bankers Association, many borrowers do not qualify for new loans because of credit scores or income.
Additionally, banks are reluctant to lend because they are worried they may be forced to buy back bad loans from Fannie Mae and Freddie Mac.
via Freddie Mac