July 29 (Bloomberg) -- Mortgage rates for U.S. homes set a record low for the sixth straight week, potentially freeing up money for consumers to spend elsewhere.
Investors seeking the relative safety of bonds backed by government-controlled home finance companies Fannie Mae and Freddie Mac drove the average rate for a 30-year fixed mortgage down to 4.54 percent in the week ended today from 4.56 percent last week, McLean, Virginia-based Freddie Mac said. The average 15-year rate was 4 percent, also a record in the data going back to 1971, the company said in a statement.
“It’s not going to help out everybody but it will help,” said Dana Johnson, chief economist at Comerica Inc. in New York. “Lower rates are a mechanism by which the economy can strengthen over time.”
Falling rates have done little to boost housing demand that plunged after a federal tax credit of as much as $8,000 expired April 30. The Mortgage Bankers Association’s index of home-loan applications fell 4.4 percent in the week ended July 23, approaching the 13-year low touched earlier this month, the Washington-based group said.
The number of Americans filing first-time claims for unemployment insurance fell to 457,000 last week, a figure that signals the labor market will be slow to improve even as the economy expands. The 10-year weekly average for initial claims is 390,700, according to data compiled by Bloomberg.
“The labor markets are still tentative and so we’ll have to see that improve before we see housing really improve,” said George Mokrzan, chief economist at Huntington National Bank in Columbus. “Banks are just as interested in people’s employment as the people themselves.”
Overall Economic Growth
Growth in the world’s largest economy will average 2.8 percent from the current quarter through the second quarter of 2011, according to the median estimate of 52 economists surveyed by Bloomberg News from July 1 to July 8, down 0.1 percentage point from last month.
Low-interest home refinancings are one economic driver that may help because they free-up cash, Johnson said.
At the current 30-year rate, monthly payments for a $100,000 loan would be about $509, down $43 from a year ago.
Personal consumption in the U.S. is expected to have risen 2.4 percent in the second quarter, according to the average estimate of 20 economists in a Bloomberg survey. The latest figures are scheduled for release tomorrow.
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