Consumers are not rushing to refinance their loans or buy homes despite the fact that mortgage rates have dropped to their lowest level in more than five decades.
Freddie Mac reported today that the average rate for 30-year fixed loans sank to 4.58 percent this week which is down from the previous record of 4.69 percent set last week. The last time mortgage rates were this low was back in the 1950s.
As investors continued to be cautious of the European debt crisis the stock market has shifted money into the safety of Treasury bonds which has driven down yields. Mortgage rates usually follow yields on long-term Treasuries and thus rates have fallen over the past two months.
Tighter lending standards and declining home equity have also continued to make it difficult for many borrowers to refinance.
The Mortgage Bankers Association said yesterday that applications for mortgages rose nearly 9 percent last week from a week earlier and remains at only about half the level of early 2009.
It is generally considered worthwhile for homeowners to refinance if they can take at least three-quarters of a percentage point off the rates they currently pay now and plan to stay in their homes for a long time.