Rates for 30-year U.S. mortgages declined to the lowest level on record after the Obama administration announced measures to make it easier for homeowners to reduce their monthly payments by refinancing.
The average rate for a 30-year fixed loan fell to 3.87 percent, the lowest in records dating to 1971, from 3.98 percent in the week ended today, Freddie Mac said in a statement. The average 15-year rate dropped to 3.14 percent from 3.24 percent, according to the McLean, Virginia-based mortgage-finance company.
President Barack Obama introduced a plan yesterday that he said would allow more borrowers to benefit from the low rates. Homeowners would be able to refinance into loans guaranteed by the Federal Housing Administration, even if their home debt is more than their properties are worth. High unemployment and weak consumer confidence are reducing the positive effects of low borrowing costs, said Donald Rissmiller, chief economist at Strategas Research Partners LLC in New York.
“They’re worried about having a job and worried about the home being underwater,” Rissmiller said in a telephone interview yesterday. “The employment question is really important here.”
The U.S. unemployment rate will remain at 8.5 percent for January when the Labor Department issues the data on Friday, according to the average estimate of 79 economists surveyed by Bloomberg.
Residential real estate prices fell more than forecast in November, showing distressed properties are continuing to hamper a recovery. The S&P/Case-Shiller index of values in 20 U.S. cities fell 3.7 percent from November 2010 after dropping 3.4 percent in the year ended in October, the group said Jan. 31. Economists projected a 3.3 percent decline, according to the median estimate in a survey.
Home-loan applications decreased in the period ended Jan. 27, the Mortgage Bankers Association said yesterday. The Washington-based group’s measure of purchase loans slipped 1.7 percent, while its refinancing gauge fell 3.6 percent.