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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Feb 9, 2021

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Since the beginning of May, 15- and 30-year home loan interest rates plummeted to record-breaking lows. This trend of falling rates coupled with the weak housing market, has continued into July.

The results of the Primary Mortgage Market Survey from Freddie Mac show that the average fixed mortgage rate is continuing to reach new record lows due to a decline in consumer spending and a shrinking of the manufacturing industry.

According to the home loan interest rates survey, in 10 of the last 11 weeks, the average 30-year fixed-rate mortgage matched or broke historic records.

This week’s rate for 30-year fixed-rate mortgages (FRM) is 3.62 but back in the final week of June it was 3.66 percent.

This week’s rate for 15-year FRMs is 2.89 percent but back in the final week of June it was 2.94 percent.

Freddie Mac leadership noticed the continuing home loan interest rates trend and also the accompanying factors.

“Recent economic data releases of less consumer spending and a contraction in the manufacturing industry drove long-term Treasury bond yields lower over the week and allowed fixed mortgage rates to hit new all-time record lows,” said Frank Nothaft, vice president and chief economist at Freddie Mac.

Nothaft noted that consumer spending has continued to lessen since April. He also commented that manufacturing shrank in June for the first time since July 2009.

The shrinking of manufacturing in June is a worrisome sign that the job market may continue to flat-line, which directly influences the health of the housing market.

As the mortgage industry is painfully aware, people without jobs often shift their financial priorities from their mortgages to their other loans. While lenders may find comfort in the fact that low interest rates incentivize refinancing opportunities, rates may need to drop lower to stop the wave of strategic defaults that a poor job market will bring.

Likewise, low rates also mean that prospective borrowers, however few there may be, will be incentivized to get a mortgage and take advantage of the present low rates. While an increase in mortgage loan borrowing would be great for the industry, this continued trend of record-breaking rates comes as a result of poor economic triggers.

Falling home loan interest rates hints at a shrinking supply of prospective home buyers and a growing supply of home properties. This negative supply and demand curve we’re seeing feeds into the dismal jobs market since contractors, builders, construction suppliers, and building suppliers suffer from decreased work.

While the few prospective homeowners or investors who are house shopping may enjoy these nose-diving home loan interest rates, it remains to be seen if the economy will continue to worsen amid the looming threat of a second, or “double-dip,” recession.