Mortgage rates sink to new record low

Mortgage rates have fallen to a new record low, according to Freddie Mac, and the stagnant economy is to blame.

The 30-year fixed-rate mortgage dropped to an average of 3.67% in the week ended June 7, Freddie Mac said Thursday.

This is the sixth consecutive week of declines. The 30-year rate is down from 3.75% in the prior week, and well below from the year-ago rate of 4.49%.

“Interest rates have been on a one-way elevator trip to the cellar,” said Mike Larson, housing market analyst for Weiss Research. “We have never seen rates this cheap.”

Freddie Mac, one of the nation’s largest backers of mortgage securities along with Fannie Mae, also said the average rate for 15-year mortgage — which is popular for refinancing — dropped to 2.94%. That’s compared to 2.97% in the prior week, and the year-ago average rate of 3.68%.

Rates have continued to slump in tandem with the U.S. economy. Freddie Mac attributed the rock-bottom rates to two recent economic reports: the anemic payroll growth of 69,000 jobs in May, which pushed the unemployment rate up to 8.2%, and the weaker-than-expected gross domestic product growth of a 1.9% annual rate in the first quarter.

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Despite the low rates, Larson doesn’t see any reason to believe that the housing market will pick up, given the state of the economy.

“Housing in some markets has stabilized, but it’s not booming, by any stretch of the imagination,” he said. “People aren’t knocking down doors to buy houses.”

The low mortgage rates are happening as home prices hit new post-bubble lows, according to the S&P/Case-Shiller home price index of 20 major markets. Home prices have not been this low since mid-2002.

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