Interest rates for 30-year fixed-rate home mortgages slipped Thursday to just under 4 percent for the first time since the 1940s. Rates for those with good credit were hovering around 3.9 percent.
A Mortgage Bankers Association spokesman said the drop of about a tenth of a point from last week is not expected to draw more buyers or owners trying to refinance. The number of new mortgagees dropped by 4 percent in late September as interest rates were sliding from 4.1 or higher to near 4 percent, an association report says.
The dipping rates are in part because the 10-year U.S. Treasury bond, a benchmark that mortgage rates track, dropped to less than 2 percent this week, closing as low as 1.78 percent. Investors fleeing euro-dominated securities for the U.S. are helping push prices down, an association report says, and the fluttering economy is also keeping rates low.
Holden Lewis, an editor at Bankrate.com, said old rules of thumb regarding linkages between dropping rates and rising numbers of buyers or those refinancing no longer holds true in this housing economy.
The numbers of new mortgagees are tied to available credit, the number of people who can't sell a house because they are upside down on what they owe, and people waiting to see if prices and rates will drop even further.
"No one knows how low they can go," Lewis said. "Eight years ago, during the biggest refinancing bump of all time, I thought it was impossible for rates to dip below 4.5 percent. But they did."
The vast majority of mortgages in the last week of September, 79 percent, were for refinances. That percentage had been as low as the 50s in 2009. Those taking advantage of the low rates to refinance mortgages are shifting toward 15- rather than 30-year loans. Fifteen-year loans made up 31 percent of all refinances in September.
How much difference can a point make in a payment?
Monthly payments on a $150,000 home *
Interest rate -- Monthly payment -- Total interest paid in 30 years
3.9% $722 $83,760
4.9 % $793 $109,273
5.9% $868 $136,274
6.9% $946 $164,515
Average monthly interest rate for 30-year mortgages in September **
2011: 4.24%
2010: 4.45%
2009: 5.00%
2008: 6.01%
2007: 6.31%
* with a $30,000 down payment, good credit, including 1.5 percent of each payment for property taxes, and paying one point.
** Source: Mortgage Bankers Association
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