pushing down interest rates to support a sputtering economy

By
Real Estate Agent with Re/Max 10 New Lenox Illinois

E. Scott Reckard explains the typical rate on a 30-year fixed mortgage tumbled below 3.5% for the first time this week, Freddie Mac said -- the latest record low in a trend that has fired up refinancings but done little to ignite housing demand.

Freddie Mac's weekly survey of what lenders are offering to rock-solid borrowers showed the 30-year rate at an average of 3.49%, down from 3.53% last week. The 15-year fixed loan fell from 2.83% to 2.8%. Borrowers would have paid 0.7% of the loan amount in lender fees and points to obtain the rates, according to Freddie Mac.

The survey underscores the success of the Federal Reserve in pushing down interest rates to support a sputtering economy that shows few signs of inflation.

In late July 2010 and 2011 the typical 30-year rate in the Freddie Mac survey was just over 4.5%, more than a percentage point higher than now. The 30-year rate was above 6% in 2006 and most of 2007, over 8% back in 2000, and over 10% in 1990. Back in the bad old days of inflation, the rate topped 18% for 10 weeks in 1981.

This year's record rates have created a frenzy of refinancing by homeowners who still have equity in their properties and are current on their loans. But they have done little to spur housing demand, as Celia Chen, a housing economist for Moody's Analytics, pointed out.

"Home sales are slowly improving, but the pace of sales is still very weak," Chen said Thursday. The low rates are only available to households with excellent credit and earnings, she noted, and sales are constrained by weak job growth and millions of homeowners who owe more on their mortgages than their homes are worth.

"I guess the good news is that if rates were to go up back up to 4.5%, it probably wouldn’t have a huge negative impact on home sales," Chen said.  "The impact on refinancing, however, would be decidedly negative."

close

This entry hasn't been re-blogged:

Re-Blogged By Re-Blogged At
Topic:
ActiveRain Community
Location:
Illinois Will County Frankfort
Tags:
pushing down interest rates to support a sputtering economy

Spam prevention
Show All Comments
Rainmaker
856,798
Elite Home Sales Team
Elite Home Sales Team OC - Corona del Mar, CA
A Tenacious and Skilled Real Estate Team

This goes to what motivates someone to purchase a home.  Consumer confidence is the key.

Aug 02, 2012 12:54 AM #1
Rainmaker
1,560,589
Gary L. Waters Broker Associate, Bucci Realty
Bucci Realty, Inc. - Melbourne, FL
Fifteen Years Experience in Brevard County

If sales depended only on interest rates then we would be booming.  As said in #1 above it is all about consumer confidence.

 

Aug 02, 2012 01:00 AM #2
Rainmaker
1,289,051
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Dale:  No matter how low the rates go, it doesn't seem to be offsetting the nerves of the potential American home buyer.  The news, economy, elections, Europe, employment predictions ... they're making the majority of those buyers hold off.  Perhaps after the election we will see a change in movement.  Hopefully for the good ...

Gene

Aug 02, 2012 02:41 AM #3
Rainmaker
238,276
Dale Taylor
Re/Max 10 New Lenox Illinois - Frankfort, IL
Realtor = Chicago Illinois Homes Townhomes Condos

Appreciate all of your comments and agree with you.  As I was preparing to introduce this information, I thought of how many potential Buyers out there may not qualify for these low interest rates, because they have to do some credit repair now.  However, there is another reality in today's economy challenges.  Some consumer's credit repair issues will take time, in the fact it may be as simple as to allow time to create a sufficient distance of time from the initial reported poor credit, resulting in many Buyers just not being ready to purchase now.  I think this may be one of the roots leading to a lack of consumer confidence?  I am sure there are numerous other reasons? 

Aug 02, 2012 03:53 AM #4
Show All Comments

What's the reason you're reporting this blog entry?

Are you sure you want to report this blog entry as spam?

Rainmaker
238,276

Dale Taylor

Realtor = Chicago Illinois Homes Townhomes Condos
Ask me a question
*
*
*
*

Additional Information