Mortgage rates at lowest in 50 years

Mortgage rates have sunk to the lowest level in more than five decades, but consumers are not rushing to refinance their loans or purchase a home.

Mortgage Company Freddie Mac said Thursday the average 30-year fixed loans to 4.58 percent this week sank.

This represents a decrease from the previous record of 4.69 percent set last week and the lowest since the mortgage company began keeping records in 1971. The last time they were cheaper was the 1950s, when most housing loans long term lasted only 20 or 25 years.

Rates have declined over the last two months. Investors are wary of the debt crisis and the European stock of money have changed on the safety of Treasury bills, driving down yields. Mortgage rates tend to track the performance of Treasury long-term.

On Wednesday, the yield on the benchmark Treasury note to 10 years declined to 2.95 percent. It was the first time it dropped below 3 percent since April 2009, when markets begin to recover from the financial crisis.

But tighter credit standards and declining home equity have made it difficult for many borrowers to refinance. Many of those eligible have already done over the last 18 months.

The mortgage applications rose nearly 9 percent last week from a week earlier, the Mortgage Bankers Association said Wednesday. But they remain only about half the level of early 2009 and far from the refinancing boom of 2003-2005, when house prices were rising, and borrowers were able to draw equity from their house to pay for home renovations, boats and vacation homes.

Many Americans have more on their mortgages than their homes are worth and can not refinance through normal channels. The Obama administration has launched programs to help borrowers refinance if they are up to 25 per cent more than the value of their homes and loans secured by mortgage giants Fannie Mae and Freddie Mac.

About 291,000 homeowners have participated as of March - a small fraction of the 15 million homeowners who are "underwater" on their mortgages.

"I expect to see pockets of activity re-fi compared to a global wave," said Scott Buchta, chief strategist at Braver Stern mortgage securities. "The problem is, for many borrowers, they have no equity in their homes."

If rates drop below 4.5 percent, Buchta said, that could spark a resurgence of refinancing activity. But it would be limited to people who bought homes or refinanced during the past year and a rate of 5 percent or more.

To calculate the national average, Freddie Mac collects mortgage rates from Monday to Wednesday each week from lenders across the country. Prices often fluctuate significantly, even in a given day.

Rates on fixed rate mortgages over 15 years has dropped to an average of 4.04 percent, the lowest on record dating back to September 1991 and 4.13 percent a week earlier.

Rates on five-year adjustable rate mortgages averaged 3.79 percent, down 3.84 percent a week earlier. This was also the lowest on records of Freddie Mac, which only date from January 2005.

The average rates on variable rate mortgages from a previous year to 3.8 percent from 3.77 percent.

Rates do not include add-on fees designated as points. A point equals 1 percent of the total loan amount. The nationwide fee for all types of loans in the investigation of Freddie Mac averaged 0.7 points.

Refinancing is generally regarded as useful for homeowners who can shave at least three quarters of a percentage point on the rates they pay now and plan to stay in their homes for a long time.

Besides the cost of a mortgage broker or lender, there are fees for title insurance, a new assessment, document processing and other charges. In "no cost" mortgages, the costs are often added to the loan amount or the interest rate is higher.