Record low for 30 year mortgage loans

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The average rate on 30-year fixed mortgages fell again, dropping below 3.5% for the first time on records that date back 60 years.Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan dropped to 3.49% from 3.53% last week. The loans are the lowest since long-term mortgages began in the 1950s.

The average rate on the 15-year fixed mortgage, a popular refinancing option, dipped to 2.80%. That’s below last week’s previous record of 2.83%.The rate on the 30-year loan has fallen to or matched record lows 13 of the past 14 weeks. Cheaper mortgages have helped drive a modest but uneven housing recovery. For example, another report Thursday said buyers signed fewer contracts to purchase previously occupied homes last month.

The National Association of Realtors says its index of pending sales agreements fell 1.4% in June to 99.3. May’s reading was revised down to 100.7. A reading of 100 is considered healthy. The index is 9.5% higher than it was a year ago. The index bottomed at 75.88 in June 2010 after a homebuyers’ tax credit expired.

Contract signings typically indicate where the housing market is headed. There’s generally a one- to two-month lag between a signed contract and a completed deal.Sales of new and previously occupied homes fell in June but were higher than the same month last year. Home prices have started to stabilize in many large markets. And builders are more confident and are putting up more houses than they have in nearly four years.

Low mortgage rates could also provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend. Many homeowners use the savings on renovations, furniture, appliances and other improvements, which help drive growth. Still, the pace of home sales remains well below healthy levels. Many people are still having difficulty qualifying for home loans or can’t afford larger down payments required by banks.The sluggish job market could deter some from making a purchase this year.

Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. A weaker U.S. economy and uncertainty about how Europe will resolve its debt crisis have led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week.

The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.

The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans rose to 0.7 point from 0.6 the previous week.

The average rate on one-year adjustable rate mortgages rose to 2.71% from 2.69%. The fee for one-year adjustable rate loans edged up to 0.5 point from 0.4 point.

The average rate on five-year adjustable rate mortgages jumped to 2.74% from 2.69% last week. The fee was unchanged at 0.6 point.

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