Today’s report from Freddie Mac on mortgage rates continues the trend of ever-declining interest costs. The interest rate on a 30-year fixed-rate mortgage fell to an average of 3.37% for the week, just 0.01% above the all-time low.
Freddie Mac’s chief economist noted:
Mortgage rates remained more or less unchanged this week as home construction builds up steam. Construction on single-family homes jumped to an annualized rate of 11 percent in August, the strongest pace since August 2008. Over the first nine months of the year, single-family starts were 23 percent higher than the same period last year. Moreover, homebuilder confidence rose for the sixth consecutive month in October to the highest level since June 2006, according to the NAHB/Wells Fargo Housing Market Index.
Interest on a 15-year fixed-rate mortgage averaged 2.66%, down from 2.7% last week, and the 5-year Treasury-indexed hybrid adjustable-rate rose from 2.73% last week to 2.75% this week.
Cheap money is doing all it can to restart the U.S. housing market. The yield on a 10-year Treasury note is currently about 1.625%. Historically, interest on a 30-year fixed-rate mortgage would be about 1.5% above that — or 3.125%. It’s conceivable, given the Fed’s latest round of easing, that mortgage rates could fall much closer to the 10-year yields. But then, of course, only the Sultan of Brunei and a handful of other Middle Eastern oil royals would qualify for the loans.