30-Year Mortgage Rates Sink to Lowest on Record

Interest rates on 30-year fixed rate mortgages dipped to their lowest level in at least 37 years after the Federal Reserve this week reaffirmed its commitment to a program designed to loosen consumer lending, according to a closely watched weekly survey released yesterday.

The average rate fell to 5.19 percent, down from 5.47 percent the previous week and 6.14 percent at the same time last year, according to mortgage financier Freddie Mac, which polled lenders the first three days of this week. The rate is the lowest since the firm started tracking such data in April 1971.

For borrowers, that means the monthly principal and interest payment on a $200,000 mortgage at this rate is $1,097. That's $35 less than it was at last week's rate and $120 less than it was a year earlier. The previous low in Freddie Mac's survey was 5.21 percent in June 2003. In the 1960s, 30-year mortgage rates were generally between 6 and 8 percent.

It is the seventh consecutive week that rates have fallen. The attention-grabbing numbers have sparked huge volumes of mortgage applications, particularly from homeowners hoping to refinance. But many lenders also report that some borrowers can't secure the rates they want because they lack the required credit scores or home equity.

Steve Nearman, a financial planner in Alexandria, said only two of the 12 clients he has worked with who have tried to refinance in the past two weeks have succeeded.

"This has been one of the most frustrating times of my 21-year career," Nearman said. "The pendulum has swung from easy money to the other extreme, where people can't get refinanced."

For many borrowers, the home appraisals required for most new loans present the toughest hurdle now that home values have plunged in most of the country. These appraisals are based on the most recent sales of comparable homes in a borrower's neighborhood. If the appraisal comes in below what the borrower owes on the home, refinancing is nearly impossible, except for some loans insured by the Federal Housing Administration.

"If you purchased a home within the last three years, there has been no appreciation in most markets and in many, homes have depreciated," said Eric Gates, a mortgage broker at Apex Home Loans in Bethesda.

First American CoreLogic, a mortgage research firm, estimates that one out of every five people nationwide owes more than their home is worth. In the Washington area, the problem is most prevalent in Prince William and Prince George's counties.

Borrowers who are trying to refinance a second home or consolidate a first and second mortgage may also encounter problems, said Barbara Sheehan, an assistant vice president at Navy Federal Credit Union. "Everybody is a little risk-averse."

Sheehan said that the average rate at her credit union dropped to 4.75 percent yesterday on a 30-year fixed rate mortgage with minimal points, which are the fees borrowers pay to reduce the rate on the loan. A point is 1 percent of the amount of the loan.

The mortgage rates in yesterday's Freddie Mac survey include 0.7 point.

Many firms regularly track interest rates and come up with slightly different numbers because they survey different sets of lenders at different times of the day or week.

For instance, HSH Associates reported yesterday's average at 5.18 percent, up from the previous day when the average was 5.06 percent.

Keith Gumbinger of HSH predicts that rates will hover around this range for the foreseeable future because of the unprecedented level of support that the mortgage market is receiving from the Federal Reserve, which pledged last month to buy a chunk of mortgage-backed securities.

The announcement immediately pushed rates down. When the Fed renewed its commitment earlier this week, rates dropped again.

"The Federal Reserve has stepped into the market in a meaningful way," Gumbinger said. "Unlike previous dips in rates that were driven by the private market, this one seems more durable."