Mortgage Rates Hit Record Low -- Time to Refinance?

The recent carnage in the stock market has led to lower interest rates on Treasury securities, with the yield on the 10-year note falling as low as 2.938% before ending last week at 2.98%. The lower rates have spilled over into the mortgage market, where interest rates hit a record low. The average rate on a 30-year fixed-rate mortgage sank to 4.58% and to 4.09% on a 15-year fixed-rate loan. Those levels are the lowest since Freddie Mac started tracking rates in 1971.

That ought to be good news for the housing market, but real-estate pros noted that there are still some barriers in the way of recovery. Even though the combination of lower home prices and lower mortgage rates have made homes far more affordable, there’s no stampede of buyers. According to a Mortgage Bankers Association survey, mortgage applications were up 8.8% in the last week in June compared to the same period last year. Most of those applications were for refinancing, however; mortgage applications for purchases fell by 3.3%. (Should you refinance? Online calculators like this one can help you figure out if it's worth it.)

The real-estate market has been weighed down by the demise of the government’s first-time homebuyer credit, which helped fuel a buying spree earlier this year and caused a significant uptick in the closely watched S&P/Case-Shiller Home Price Index. The loss of the tax credit, along with a moribund job market and tighter lending standards, are casting some doubts about a sustained recovery in housing arena, according to real-estate industry watchers.

Until jobs rebound, the outlook for home sales is likely to remain cloudy. Without a job, potential home buyers can’t afford to buy a home, even at a lower price, and those who are employed may find it hard to qualify for a loan.