This is the lowest level the 30-year fixed has reached in more than a year, according to Bankrate's weekly surveys. It's somewhat surprising that mortgage rates have stayed low for so long, some mortgage analysts say.
Thank the Europeans
But they will likely remain low for now, thanks to some of the economic issues in Europe, says Michael Becker, branch manager at Sierra Pacific Mortgage in White Marsh, Maryland.
"If you are wondering why rates haven't gone up yet, all you have to do is look at the bond yields in Spain and other parts of Europe," he says.
European government bond yields plummeted this week on speculation that the European Central Bank might take measures to fight low growth and the threat of deflation. The Spanish 10-year bond yield reached a low of 2.08 percent Wednesday. The 10-year bond yield in Germany tumbled below 0.9 percent.
In the United States, investors could find 10-year Treasury yields below 2.4 percent this week.
"If you are investing in bonds and you are looking at yields, that has got to make the U.S. a little more attractive," Becker says.
When the demand for U.S. Treasury bonds and mortgage bonds increases, yields, or the rate of return on these investments, fall. Mortgage rates tend to follow the same direction as yields.
Positive news could threaten low rates
Bond yields normally rise when positive economic news is released, but that hasn't been the case this week.
Mortgage rates should be going up after some of the latest economic readings, says Brett Sinnott, director of secondary marketing at CMG Mortgage in San Ramon, California. But global economic concerns and the tension between Ukraine and Russia have counteracted these upward forces.
"If we didn't have any foreign tension, all this positive economic news would push rates up," he says.
Among some of the latest data is the consumer confidence report, which shows U.S. consumers are more optimistic about the economy. The Conference Board said this week that its consumer confidence index increased to 92.4 in August from 90.3 the previous month.
Orders for big-ticket manufactured goods soared 22.6 percent in July, exceeding economists' expectations.
Still, investors seem to be taking this data with a grain of salt.
"The jump in orders does point to continued, decent overall economic growth, but until we get the consumer going, strong growth will remain a wish, not a reality," says Joel Naroff, president and chief economist at Naroff Economic Advisors.
What's next for rates?
For now, the economic and political issues abroad will continue to help keep rates low in the United States. But don't bet on rates staying low forever, Sinnott says.
As the Fed offers more hints that it will raise the federal funds rate, probably sometime next year, rates have only one way to go, he says. And that's up.
"This is really the time for borrowers to get their rates locked," he says.