Mortgage interest rates hit 50-year lows today. They’re as low as anybody can remember.
This will spur refinancing applications and have the potential to put more money back into the economy to boost demand.
With U.S. unemployment at 9% and lenders raising standards, it is not easy to get a mortgage. Consequently, home purchases fell in July from June.
In an uncertain economic environment where the Dow Jones average may fall 500 points on any given day, even rich people are reluctant to make big purchases, including home buys.
Over the past 200 years, the average yield on a 10-year bond has been 4.7%. Today, the yield went briefly below 2%.
The decline followed a slide in yields for 10-year Treasury notes, a benchmark for consumer debt including mortgages. The yield touched a record low today of 1.9735 percent, after Morgan Stanley cut its forecast for global growth and concern grew that Europe’s debt crisis may deepen. Lower mortgage rates have done little to boost home demand as the housing market stagnates.
“Low interest rates are helpful at the margins but it’s indicating a lot of concerns about the economy,” said Scott Brown, chief economist for Raymond James & Associates Inc. in St. Petersburg, Florida. “The move into Treasuries is driven by fear.”