Do Record-Low Mortgage Rates Matter Today?
July 7th, 2010 categories: Chicago Info/News, Economic Recovery, Housing Market, Mortgage Info
Let’s talk about the good news first: The average interest rate on a 30-year fixed-rate mortgage fell to 4.58 percent for the week ended July 1. Freddie Mac says that this is the lowest since the mortgage financing company started tracking mortgage interest rates in 1971.
Amy Hoak, a columnist for MarketWatch, lays out the bad news in a recent column: Fewer U.S. consumers seem to care.
Hoak was reporting from the Kitchen & Bath Industry Show in Chicago. This is a fun show, one that showcases the latest trends in kitchen sinks, whirlpool tubs and cabinetry. It’s a place to go to dream of that ideal kitchen or bathroom. It’s hard to imagine, though, that too many of the vendors working the show were having fun this year. As the housing industry has struggled, so have the remodeling and do-it-yourself businesses.
As Hoak writes in her column, consumers aren’t comfortable spending large sums of money today, even if mortgage interest rates are at record lows. They’re worried about losing their jobs. And why not? The national unemployment rate remains stuck near 10 percent. That’s too high to allow people to feel comfortable financially.
At the same time, a large number of homeowners can’t even take advantage of the low rates to refinance their existing mortgage loans. That’s because their home values have dropped since they purchased their condominiums or single-family homes. They may no longer have the 20 percent equity that most traditional lenders require homeowners to have before approving them for a refinance.
Don’t get me wrong: It is good news for home buyers that interest rates are at such low levels. First-time buyers who don’t already own a home are especially fortunate: They can buy more home, even in Chicago neighborhoods such as Lincoln Park, Lincoln Square and Lakeview, while spending less money on a mortgage loan each month.
But until the other fundamentals of the economy improve – lower unemployment, higher housing values – don’t expect a rush of buyers to take advantage of these low interest rates.
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I completely agree that it’s a good thing that interest rates are this low. Although the job market for college grads is still really bad, I think this will help first time home buyers that are between 28-32 because they may have secured a job prior to the economy crash (assuming of course they also kept that job). Any good news is positive in the real estate market for sure.
Years from now consumers may be kicking themselves in the pants for not refinancing this year. These rates are INCREDIBLE!