Mortgage Rates at Lowest Levels of 2010, But Mortgage Activity Wanes

Current mortgage rates have dipped to their lowest levels of 2010 and the 30-year fixed conventional mortgage is very close to falling to an all-time low, Freddie Mac reported Thursday.

The mortgage finance giant stated that the national average rate on 30-year fixed conventional mortgages fell to 4.72 percent from last week’s 4.79 percent rate. That is the lowest rate since the week ending Dec. 3, 2009, when it hit a record low of 4.71 percent.

Freddie Mac also reported that the 15-year fixed-rate mortgage averaged 4.17 percent, down from last week’s 4.20 percent rate, and it is the lowest on record since Freddie Mac started tracking that mortgage type in August 1991.

“Following a relatively weak employment report, bond yields fell this week and mortgage rates followed,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Despite this historic drop in mortgage rates, data has emerged that home buying has fallen off considerably since the expiration of the first-time home buyer and repeat home buyer tax credits, and refinancing activity is also cooling down after a stretch of heavy refinancing – a mini refinance boom if you will.

The Mortgage Bankers Association reported yesterday in its Weekly Mortgage Applications Survey that the volume of mortgage applications filed in the United States last week slipped 12.2 percent from the previous week. It was the fifth-straight week that applications fell, and was the lowest volume level since February 1997. Also, the Refinance Index fell off by 14.3 percent, and the slowdown in refinance applications was the first time in a month that it went backwards.

“Purchase applications are now 35 percent below their level of four weeks ago, as home buyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April,” Michael Fratantoni, MBA’s vice president of research and economics, said in a statement.

Factor in the recent RealyTrac report that a record number of homes were foreclosed upon in May, and it is clear that unemployment and a lack of permanent, good-paying jobs has had a depleting effect on the potential home buyer pool. Almost 94,000 homes were seized by lenders as banks continue to work through a massive backlog of distressed properties.

More than 15 million Americans remain unemployed, and the U-6 unemployment rate, which includes marginally attached workers and those who are involuntarily working part-time jobs is at a whopping 16.6 percent.

So even though mortgage rates continue to plummet to these historic low rates, there aren’t enough potential home buyers and homeowners in the marketplace to take advantage of them, and subsequently propel a surge in the real estate market.