Mortgage rates continue to fall

By Marcy Gordon
AP Business Writer

WASHINGTON (AP) — Average U.S. rates on 30-year and 15-year fixed mortgages fell last week to fresh record lows for the sixth straight week.

Cheap mortgages continue to help boost prospects for home sales this year.

Mortgage buyer Freddie Mac says the average rate on the 30-year loan dropped to 3.67 percent.

That’s down sharply from 3.75 percent last week and the lowest since long-term mortgages began in the 1950s.

The 15-year mortgage, a popular refinancing option, declined to 2.94 percent. That’s down from 2.97 percent last week.

Rates on the 30-year loan have been below 4 percent since early December. The low rates are a key reason the housing industry is showing modest signs of a recovery this year.
A drop in rates could also provide some help to the economy if more people refinance.

When people refinance at lower rates, they pay less interest on their loans and have more money to spend.

A Federal Reserve survey issued Wednesday showed the economy growing moderately in most regions of the country this spring as companies continued hiring.

Manufacturing and home sales improved in most of the Fed’s 12 regional districts, as did residential and commercial construction.

In April, sales of both previously occupied homes and new homes rose near two-year highs. Builders are gaining more confidence in the market, breaking ground on more homes and requesting more permits to build single-family homes later this year.

Mortgage applications rose by 1.3 percent during the week ended June 1, according to the Mortgage Bankers Association, mainly because more people applied to refinance their homes.
Applications to buy a home actually fell for the fourth straight week.

A better job market also has made more people open to buying a home.

But a dismal jobs report for May from the government recently fanned fears that the economy is sputtering.

U.S. employers created only 69,000 jobs in May, the fewest in a year, and the unemployment rate ticked up.

The Labor Department also said the economy created far fewer jobs in the previous two months than first thought.

It revised those figures downward to show 49,000 fewer jobs created. The unemployment rate rose to 8.2 percent in May from 8.1 percent in April, the first increase in 11 months.

The pace of home sales remains well below healthy levels. Economists say it could be years before the market is fully healed.

Many people are having difficulty qualifying for home loans or can’t afford larger down payments required by banks.

Some would-be home buyers are holding off because they fear that home prices could keep falling.

Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note, which fell last week to a 66-year low. Uncertainty about how Europe will resolve its
debt crisis has led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.