Mortgage rates fell for the 10th time in the last 13 weeks, tying a record low. Now, if only the economy would cooperate, even more people could take advantage of the low rates by refinancing.
The benchmark 30-year fixed-rate mortgage fell 3 basis points this week, to 4.74 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.39 discount and origination points. One year ago, the mortgage index was 5.55 percent; four weeks ago, it was 4.81 percent.
The benchmark 15-year fixed-rate mortgage fell 5 basis points, to 4.18 percent. The benchmark 5/1 adjustable-rate mortgage fell 6 basis points, to 4.06 percent. Also sinking was the average jumbo 30-year fixed, which fell 7 basis points, to an all-time low of 5.43 percent.
In the nearly 25-year history of Bankrate's weekly mortgage rate survey, this week's benchmark 30-year rate of 4.74 percent ties the record low, set the week of July 7. The 15-year fixed also tied a July 7 record low, while the 5/1 ARM and the 30-year jumbo hit new lows.
Weekly national mortgage survey
Results of Bankrate.com's July 21, 2010 weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
Refinance roadblocksRefinance applications last week were at their highest level since May 2009, according to the Mortgage Bankers Association. Refinancing "is up almost 30 percent over the past four weeks, but is still well below the peak seen last spring," says Michael Fratantoni, the MBA's vice president of research and economics.
Although refis are up, refinancing activity hasn't been as high as one typically would expect with rates so low. More than 60 percent of existing mortgages have rates above 5.75 percent or so, says Cameron Findlay, chief economist for LendingTree.com.
"There's a reason why they're not refinancing, and it's got nothing to do with rate," Findlay says.
The problem, as Findlay and others see it, is that many homeowners are underwater -- they owe more than their houses are worth. Or even if they're not underwater, they have less than 20 percent equity, so they would need to buy mortgage insurance after refinancing. That makes a refi less worthwhile.
"The underlying issue continues to be appraised values," says John Walsh, president of Total Mortgage Services, a lender in Milford, Conn. "That has been the main driver of the reason why people can't refinance -- because they know they're underwater, or the appraisal doesn't come in to the value where they don't have to pay PMI."
Confidence gameWalsh adds: "The housing market is in such a precarious position. If you have an increase in mortgage rates, I think it's going to really put a damper on any type of purchase activity."
Maybe higher rates would toss home sales even deeper into the pit -- home resale stats for June are due out today, and a big drop-off is expected because of the hangover resulting from the end of the homebuyer tax credit.
But history shows that people buy homes even when mortgage rates hover in the double digits. Almost 2.9 million homes were sold in 1981, when mortgage rates peaked higher than 18 percent in October.
"One of the things that I learned in the late '80s, when I got into the business, from people who went through the time of Jimmy Carter, was it was a lot less rate and a lot more consumer confidence and employment," says Christopher Cruise, a trainer for LoanOfficerSchool.com. "If borrowers could see the light at the end of the tunnel and could see 7 percent rates and they had steady jobs, they'd rather have that than 4.5 percent rates (and be unemployed)."
Paul Anastos, president of Mortgage Master, a lender based in Walpole, Mass., agrees. Now is a great time to buy a house, he says. But consumers aren't confident enough to take the plunge.
"If you're concerned about work, or your ability to manage your personal economy, so to speak, you may not be looking for a home right now," Anastos says.