Mortgage rates fall below 4%

Thirty-year rates drop to a record low of 3.94%. But will consumers be able to take advantage?

By MSN Money Partner Oct 6, 2011 12:27PM

This post comes from Marilyn Lewis at MSN Money.


Mortgage rates broke the historic 4% barrier this week. The average rate for a 30-year fixed-rate home loan fell to 3.94% with an average 0.8 point paid, according to Freddie Mac's Weekly Primary Mortgage Market Survey. (One point is 1% of the loan amount.)


That's the lowest rate Freddie has recorded. "Freddie Mac says the rates are the lowest since its survey began in 1971, and academic research suggests that rates for 30-year mortgages were as low as 4% -- but not any lower -- under a loan program for war veterans in the mid-1940s," says The Wall Street Journal.


Bloomberg BusinessWeek credits "stricter credit standards and the slowing economy" for the dropping rates. Freddie Mac Chief Economist Frank Nothaft pointed to "increasing global economic concerns" and worries that the U.S. recovery is not holding.

Rates drop -- and so do mortgage applications
Rates also fell for 15-year fixed-rate mortgages, an increasingly popular refinancing choice. Rates on 15-year loans have been falling for six consecutive weeks.


Now mortgage buyers are paying an average 3.26% with an additional 0.8 point paid, the Freddie Mac survey found. Freddie is one of the huge, government-run (GSE) mortgage companies that buy mortgages from retail banks. Post continues after video.

Last week, 30-year fixed rates were at 4.01% on average. A year ago they averaged 4.27%, which seemed phenomenally low at the time.


A week ago 15-year fixed-rate mortgages averaged 3.28%. They averaged 3.72% at this time last year.


Despite record low lending rates, however, strict bank lending standards and a lack of equity in their homes prevent most consumers from being able to take advantage of them.


Mortgage purchases fell 4.3% in the week ending Sept. 30, according to the Mortgage Bankers Association's weekly survey of mortgage applications, here at


"What if the 30-year mortgage rate fell below 4% and few people cared?" quips The Journal.


“It seems quite clear that the effects of the lower mortgage rates have been more than offset by the recent stagnation in employment and decline in real incomes,” BusinessWeek says, quoting a note to clients from Paul Dales, a senior U.S. economist at Capital Economics Ltd. in Toronto.


Economic stress is blamed
In fact, given the low prices banks are paying for money, retail mortgage-interest rates should be even lower, The Journal says.


But banks have laid off large numbers of staff, leaving them short-handed and looking ways to keep business manageable: "To manage volumes, they’ll sometimes raise the spreads between their borrowing costs and the rates that are offered to consumers," The Journal writes.


Economists are increasingly articulating their worry about the plight of American consumers. A solid recovery will depend in great part on a revival of consumer spending.


In a prepared statement, Freddie Mac Chief Economist Frank Nothaft credited the drop in mortgage rates to "a sharp drop in 10-year Treasuries early in the week as concerns over a global recession grew."


He also pointed to Federal Reserve Chairman Ben Bernanke's testimony to Congress's Joint Economic Committee on Tuesday in which Bernanke "said the recovery is close to 'faltering' and stressed the need for lawmakers to act."


Writes The Journal:

Eric Rosengren, president of the Federal Reserve Bank of Boston, spoke to the problem facing policy makers’ inability to help consumers benefit from low rates in a speech last week in Sweden. Falling home prices “have disrupted the transmission of monetary policy,” he said, resulting in “a situation where the availability of credit is more important in many cases than the cost of credit.”
Low rates could give more urgency to a recent push by the White House to fix an administration effort that allows homeowners to refinance their mortgages if they owe more than their loans are worth. The program is open to borrowers with loans backed by Fannie Mae and Freddie Mac.
“Clearly getting more money into the hands of homeowners who would spend it could help to fuel GDP growth,” said Mr. Rosengren.

More on MSN Money:



Oct 6, 2011 2:03PM
Even with very good credit, it is very difficult to re-fi or finance housing. I bought a small house in April and it took 2 months of responding to nonsensical repeated requests from the loan agent.  They asked for the same thing....over and over again.  

The $600 Billion that the Fed gave to European banks with QE2 would have been better much better spent refinancing American homes. But the Fed does not care about American citizens.
Oct 6, 2011 2:40PM

I hear all you folks!!   What a tragedy!!   We're going back to expecting people to be able to pay their mortgage off instead of giving loans to people who will be leaning on the taxpayer to bail them out.  You actually have to apply, be checked out to make sure you're credit worthy and, oh my god, that takes a couple of months.  But then you've grown up in a world where loans were approved in ten minutes.  Easy money flowed and party time for all.


Course I figure most of you are way too young to remember when things were much different, money wasn't given to anyone walking through the door.   But then the government wasn't sitting on a couple of trillion of toxic mortgages, running red ink by the ocean full, people paid their way and all the other things that have gone by the wayside past 30 yrs or so. 

Oct 6, 2011 12:57PM
This is bullsheet!  Just you go and try to get this rate.....  Maybe they are talking about Barney Franks or the Clinton's?
Oct 6, 2011 1:17PM

exactly papa - rates for the upper 1%.


i did a refi back in january this year.  with an 805 credit number, 80% equity, a decent job, and 1 year of cash in the bank for my reserves it took 2 months to finally get approval.  it was like pulling teeth! 


the simple joe who doesn't over extend and has lower credit than mine and even 3 months cash in the bank will continue to be screwed by the banks

Oct 6, 2011 1:59PM
ah yes! Once again the media is about 2 weeks behind. Rates were lower 2 weeks ago than they are today. AND the rate they quote is also "par" rate which would require points to get.
Oct 6, 2011 6:19PM

What about all the people that are upside down in their homes and want to stay in them,  and don't want to become a walk-away or foreclosure statistic.    I can't refinance to take advantage of the lower rate because my house is worth half of what I paid for it.   

Oct 6, 2011 6:07PM
We should have never bailed out the banks. Here and now the banks have their money and are not making any loans. The inbreed politicians and bankers have their money and are happily screwing the American people while kissing the illegals and muslims a#$#$%s.
Oct 6, 2011 1:33PM

Typical- actual rates go upat least .250 to rate for both 30 year and 15 fixed and the news a week late quotes histric lows...


Once the news is posted, it is too late!  HOMER

Oct 7, 2011 5:01AM
A point of interest. No matter what the rates are, part of the jobs bill is doing away with the mortgage interest rate deduction, charitable deductions, and state tax deductions. That's the price that all America will pay for this 450 billion dollar stimulus. And some thought it would just be a tax on the rich????? Yeah, they're plugging the loop holes----ours.
Oct 14, 2011 10:01AM
Oct 7, 2011 6:47AM

"123 Refi" recommends that since there's a higher volume of refinance applicants now, it's best to be prepared and gather all the financial docs you need before you seek a quote so you can get your application processed before lenders raise rates.

Oct 7, 2011 6:34AM
Until wages go up and there is more job stability the younger people will not be able to afford to buy homes.  A low interest rate helps but people still need to have money to make the monthly payments.  The reason people are not buying is because they dont have the money due to middle class strangulation. How can people spend money when they dont make anything? 
Jul 14, 2012 1:31AM

It was historical fall in mortgage rate. I refinanced my house from  Reliance first capital at that time.It was good experience with them.

Oct 7, 2011 4:26AM

It is prohibitive to refinance when there are fees involved and the mortgage insurance brings the overall house payment right back up to what it was in the first place. We're not going to support yet another insurance company just for a lower rate and a higher mortgage because the refinance fees are rolled into the mortgage.


Nope, we just want a simple rate adjustment...change our interest from what it was to current rates, no muss no fuss. But, that wouldn't enable banks to get any fees and the mortgage insurance wouldn't get any fees,'t take out a mortgage larger than you can afford...we are very grateful we did not, and, we're still feeling the pinch...barely floating.

Oct 6, 2011 3:13PM

Get ready for the next "bubble" ---- my 1st house in 1978 required 20% down for a 30 year fixed mortgage at 9-3/4%.  Since then,  the dropping of interest rates allowed home prices to appreciate much faster than inflation & wages due to the monthly payment buying "more house".  Going forward from here --- I don't see wages (monthly payment capacity) going up dramatically --- but --- interest rates will go up due to the government feeding inflation.  Someone who buys now will have their mortgage go underwater on house value when rates go back up.  Get ready for the next financial crises.

Oct 6, 2011 1:19PM
There cannot be a low interest rate when you need better credit scores to borrow money. The interest paid today is much more expensive than 4 years ago with a lower credit score. The banks I have talked to about refinancing have said they will only loan money the tried and true way of lending, meaning that you have to take a 3/1 ARM baloon type loan because they do not know when the FED will start to tighten money supply. That means no long term money will be lent in this environment. Now, most of these banks have been smaller than say the top 20 big banks. In real terms my payment would be less than $100.00 a month if I could borrow money over 30 years, still they won't loan me money over 30 years unless it is like stated above.
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.