30-Year Mortgage Loan Rates Hit Record Low—Again
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UPDATED: Jan 20, 2012
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This week marks yet another record breaking anniversary for mortgage loan interest rates. Freddie Mac reported that the 30-year fixed rate dropped from the previous record of 3.89 percent to 3.88 percent—breaking the historic floor for the eighth time in a single year.
Extraordinarily low rates such as this present extremely lucrative deals for willing and able homebuyers. Those in the market for a refinance are also in a great position to reduce their monthly payments and cut back on the amount of interest they will owe over the lifetime of their mortgage loan.
While these low rates draw applaud from many market analysts, Freddie Mac’s chief vice president, Frank Nothaft, made a statement that may suggest a reason for concern over the housing market.
Nobody Can Take Advantage
Despite this being the eighth time the floor has shattered on home loan rates, real estate sales have remained stagnant and slow moving.
“On the consumer front, retail sales edged up only 0.1 percent in December,” said Nothaft in a Freddie Mac press release.
Even though historic deals are presenting themselves, would-be buyers are few and far between as high unemployment and underemployment are keeping potential home loan borrowers at bay.
In addition to the lack of funds resulting from the nation’s poor job climate, a significant portion of the buying population has been removed from the market. Those who experienced foreclosure in the recent past are blacklisted from obtaining a home loan and participating in this buyer’s market. Whether they’re shunned due to a crippled credit score or because lenders are adhering to Freddie Mac’s seven year lock-out on homeowners who foreclosed, past defaulters are forced to sit idle and watch these deals pass by—even if they’re willing to buy right now.
Construction Industry’s Health
Nothaft also revealed that construction is slower than previously expected—raising alarm in the nation’s housing-start industry.
“On the business side, industrial production rose 0.4 percent in December, slightly below the market consensus forecast,” said Nothaft.
Once a prosperous industry, construction quickly became one riddled with lay-offs and lack of business following the great economic fall of 2007. Until the job market bounces back, prompting new business creation and demand for commercial buildings, this blue-collared industry will remain in a slump.
However, commercial construction’s counterpart, housing, has experienced a slight rise.
“On the home construction front, builder confidence rose for the fourth consecutive month in January to the highest level since June 2007.”
The morale of home construction professionals is reason to carry an optimistic view of the housing market’s health. Hopefully this eighth historic low in mortgage loan rates will prompt even more demand, and thus increase the supplier’s business—prompting a financial chain reaction that will ignite fuses across the entire economic market.