Mortgage rates have fallen to the lowest level in decades over the past two months and could dip below 4 percent if the economy worsens.
The average rate for 30-year fixed loans fell this week to 4.42 percent, mortgage buyer Freddie Mac said Thursday. It was the eighth time in nine weeks that rates have fallen to the lowest level since Freddie Mac began tracking rates in 1971.
Investors fear the recovery is slowing. The latest sign came Thursday when the government reported a half-million people applied for jobless benefits last week, a nine-month high.
Mortgage rates are following the economic jitters. Rates track the yields on U.S. Treasurys. Those yields have lowered in recent months as more investors put their money into safer Treasurys.
Rates could fall to 4 percent sometime next year if the economy slips back into a recession, said Michael Moskowitz, chief executive of Equity Now, a New York-based mortgage lender with operations in six states.
"The economy is going nowhere for a very long time," he said.
The average rate on 15-year fixed loans dropped to 3.9 percent. That was down from 3.92 percent last week and the lowest on records dating back to 1991.
Low rates have not helped the struggling housing market. It is hampered by tight credit and a weak economy that is producing few jobs.
More people are taking advantage of the rates to refinance their existing loans, with activity reaching the highest level since May 2009.
Many lenders are having a hard time keeping up. Like many employers, they have also slashed jobs because of the tough economy. Now they have fewer people available to process loans.
Rates are unlikely to fall to 4 percent in the next few weeks but could easily do so in the coming months, Findlay said.
To calculate the national average, Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Average rates on five-year adjustable-rate mortgages were unchanged at 3.56 percent. Rates on one-year adjustable-rate mortgages also were unchanged at an average of 3.53 percent.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount. The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year and 1-year mortgages. They averaged 0.6 of a point for 15-year and 5-year mortgages.