US fixed-rate mortgages at historic lows

The average rate for a 30-year fixed mortgage in the US has dropped below 4% for the first time in history “amid increasing global economic concerns”, government mortgage lender Freddie Mac says. 

The average annual rate on a 30-year fixed-rate mortgage has fallen to 3.94%, down from 4.01% a week ago. A year ago 30-year fixed-rate loans averaged 4.27%. 

Fixed-rate mortgages for 15 years are averaging 3.26%, down eight basis points from the previous week. A year ago 15-year fixed mortgages averaged 3.72%

Commenting on the historic lows, Frank Nothaft, vice-president and chief economist for Freddie Mac, highlighted testimony earlier in the week from Federal Reserve chairman Ben Bernanke, who said the economic recovery was “faltering” and stressed the need for lawmakers to act.

Nothaft also noted that in October US personal income fell 0.1%, the first decline since October 2009 while consumer spending remains flat. 

The decline in US mortgage rates have been in line with declining yield on 10-year government bonds amid growing fears of a worsening debt crisis in Europe and worries that the US will slide back into recession. 

Despite the low borrowing costs, home loan lending has continued to decline, with mortgage applications falling 4.3% in the last week of September, according to the Mortgage Bankers Association index. 

In addition, the S&P Case-Shiller index of home values in 20 US cities decreased 4.1% in July from a year earlier. 

Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Bloomberg the record low interest rates are a reflection of the times. 

“The US economy is fragile and the global economic headwinds remain brisk,” he says. 

Australian fixed rates have also fallen steadily since the start of the year, with the three-year average fixed rate falling from 7.43% in January to around 6.7% at the end of September, according to Ratecity.com.au. 

This week NAB cut its three year fixed rate by 10 basis points to 6.44%.

Fixed-rate mortgages are becoming more popular in Australia.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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