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30-Year Mortgage Rates in U.S. Fall Below 4%

Shelley Mitchiner, a real estate broker for Team Marti Re/Max One Realty, left, shows Sharon Willard an existing home for sale in Raleigh, North Carolina.

Shelley Mitchiner, a real estate broker for Team Marti Re/Max One Realty, left, shows Sharon Willard an existing home for sale in Raleigh, North Carolina. Photographer: Jim R. Bounds/Bloomberg

 

Oct. 4 (Bloomberg) — Henry Cisneros, who was secretary of the U.S. Department of Housing and Urban Development under President Bill Clinton, talks about the U.S. housing market and the need to cut the amount of principal troubled homeowners owe. Cisneros spoke yesterday at Bloomberg’s Los Angeles office. (Source: Bloomberg)

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30-Year Fixed Rate Below 4% for First Time

30-year fixed rate drops to 3.94%, lowest on record.

30-year fixed rate drops to 3.94%, lowest on record. Photographer: Matthew Staver/Bloomberg

Mortgage rates in the U.S. fell,
sending longer-term borrowing costs below 4 percent for the
first time on record, as stricter credit standards and the
slowing economy hold back a housing rebound.

The average rate for a 30-year fixed loan dropped to 3.94
percent in the week ended today from 4.01 percent, Freddie Mac
said in a statement. That’s the lowest in the McLean, Virginia-
based company’s records dating back to 1971. The average 15-year
rate declined to 3.26 percent from 3.28 percent last week.

Mortgage rates have tracked a slide in 10-year Treasury
yields amid concern that Europe’s debt crisis is worsening and
the U.S. economy may slide back into a recession. Low borrowing
costs have done little to revitalize the U.S. property market as
unemployment sticks above 9 percent, banks tighten credit and
home values decline. The Federal Reserve announced a plan last
month aimed at bolstering the economy and reducing loan rates
further by replacing shorter-term securities in its portfolio
with longer-term debt.

“There’s nothing to gloat over,” Sal Guatieri, a senior
economist at BMO Capital Markets in Toronto, said in a telephone
interview today. “The record low interest rates are a
reflection of the times. The U.S. economy is fragile and the
global economic headwinds remain brisk.”

Home-loan applications decreased 4.3 percent in the period
ended Sept. 30 from the prior week, according to a Mortgage
Bankers Association index. The refinancing gauge dropped 5.2
percent while the purchasing measure fell 0.8 percent, the
Washington-based trade group said yesterday.

Mortgage demand may be tested because new loan limits were
introduced this week for certain high-priced areas. The 9.1
percent drop in purchase applications for September from the
previous month suggests that buyers weren’t rushing to meet the
deadline and the limits won’t have a significant impact on
borrowing, according to Paul Dales, a senior U.S. economist at
Capital Economics Ltd. in Toronto.

The number of contracts to purchase previously owned homes
declined 1.2 percent in August, following a 1.3 percent drop the
previous month, the National Association of Realtors reported
last week. The S&P Case-Shiller index of home values in 20 U.S.
cities decreased 4.1 percent in July from a year earlier.

Purchases of new houses fell in August to a six-month low,
according to the Commerce Department. The median price slumped
7.7 percent from August 2010, the steepest 12-month drop since
July 2009.

To contact the reporter on this story:
Prashant Gopal in New York at
pgopal2@bloomberg.net

To contact the editor responsible for this story:
Kara Wetzel at
kwetzel@bloomberg.net

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