Mortgage rates have fallen to their lowest levels since the 1950s, following Treasury yields down as investors seek the perceived safety of U.S. government bonds.
“The average rate for a 30-year fixed mortgage fell to 4.12%, from 4.22%, Freddie Mac said Thursday. That’s the lowest level on records dating back to 1971. Freddie Mac says the last time rates were cheaper was 1951, when most home loans lasted just 20 or 25 years,” the Associated Press reported. “The average rate on a 15-year fixed mortgage, a popular refinancing option, fell to 3.33% from 3.39%. That’s the lowest on records dating to 1991 and likely the lowest ever, according to economists.”
Mortgage rates are closely tied to movement in yields on the 10-year Treasury note, which have plunged to about 2%. The iShares Barclays 7-10 Year Treasury Bond (NYSEArca: IEF) is up 13% year to date and near a 52-week high. Bond prices and yields move in opposite directions.
Yet the AP report noted that few Americans can take advantage of rock-bottom mortgage rates and better affordability in the wake of the housing bubble. This is due to unemployment worries, low credit scores and lack of cash for a down payment. Meanwhile, homeowners who are underwater on their mortgages find it difficult or impossible to refinance.
Banks have tightened lending standards and unemployment remains near 10%. It is estimated that about 22.7% of homeowners were underwater during the first quarter of 2011.