US home mortgage rates hit another new record low

07 October 2010 18:44  [Source: ICIS news]

WASHINGTON (ICIS)--Interest charged for US 30-year fixed rate home mortgage loans has fallen to yet another all-time low, a leading federal agency said on Thursday, raising hopes that historic housing affordability levels will spur a construction industry recovery.

The Federal Home Loan Mortgage Corporation, popularly known as Freddie Mac, said that the 30-year fixed-rate mortgage rate “dropped again to break the all-time low”, reaching an average 4.27% as of Thursday.

That rate was below the week-earlier level of 4.32%, the previous record low.

A year ago, the standard 30-year mortgage interest rate was at 4.87%.

During the peak years of the 2003-2006 US housing boom, typical fixed-rate mortgage rates were around 6% for a 30-year home loan.

Since Freddie Mac began tracking mortgage rates in 1971, the all-time peak of 18.45% was reached in October 1981.

Freddie Mac vice president and chief economist Frank Nothaft said that persistently low US inflation rates “have allowed mortgage rates to ease to new record lows this week”.

He also noted that home loan applications increased 14% in September compared with August.

The US housing sector, especially new home construction, is a key downstream consuming industry for a wide variety of chemicals and derivatives.

The National Association of Realtors (NAR) recently reported that sales of existing US homes rose by 7.6% in August, in part because of extremely low mortgage interest rates and sharply reduced home prices.

However, new home sales remain at record low levels, and home builders see little prospect of improvement until US unemployment figures ease and consumers become more confident of an economic recovery.

Founded in 1970, Freddie Mac is a federally-sponsored agency that provides a secondary market for mortgage loans.

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