Mortgage Rates Remain Near All-Time Low

The good news is mortgage rates are still holding at near their all-time lows. The bad news, of course, is that it is much harder for the average prospective home buyer to qualify for a mortgage.

In its weekly survey, Freddie Mac said fixed mortgage rates held steady this week amid mixed economic reports and some signs of improvement in the housing market. The five-year adjustable-rate mortgage hit a new record low at 3.22 percent, dropping below the previous record of 3.25 percent set November 11, 2010.

The 30-year fixed-rate mortgage (FRM) averaged 4.51 percent with an average 0.7 point for the week ending June 30, 2011, up from last week when it averaged 4.50 percent. Last year at this time, the 30-year FRM averaged 4.58 percent.  

The 15-year FRM this week averaged 3.69 percent with an average 0.7 point, the same from last week when it averaged 3.69 percent. A year ago at this time, the 15-year FRM averaged 4.04 percent.

Not much demand

Frank Nothaft, vice president and chief economist, Freddie Mac, says interest rates are holding steady amid stagnant growth in the economy. But he said there are a few hopeful signs for housing going forward.

“In April, the S&P/Case-Shiller 20-city composite home price index rose 0.7 percent, representing the first monthly increase since July 2010,” Nothaft said. “However, much of the improvement reflected the seasonal increase in homebuying over the spring-summer period.  Pending existing home sales rebounded in May, exhibiting the largest monthly increase since November 2010."

But despite the tempting mortgage rates, which can make many homes much cheaper to own than rent, home sales remain depressed. Lawrence Yun, chief economist for the National Association of Realtors (NAR), says mortgage lenders have it within their power to start a housing rebound.

More loans, please

“If banks would simply return to normal sound underwriting standards and begin lending to more creditworthy borrowers, we’d get a much faster recovery in the housing sector,” Yun said earlier this week.

Banks, however, say it is not that simple. Many lenders have tightened their lending standards, requiring large down payments, because they fear home prices could fall further. Some industry analysts say lenders will eventually loosen the standards a bit, but not until prices begin to recover. Realtors like Yun counter that prices can't begin to recover until banks begin lending again.

In the meantime, investors paying with cash – without taking out mortgages – continue to make up a large percentage of active home buyers.