Mortgage rates fall to fresh lows

NEW YORK -- The mortgage rate bar is even lower, but few homebuyers are making the jump.

Rates on fixed mortgages again fell to their lowest levels in decades this week, Freddie Mac said Thursday, after the Federal Reserve unveiled a massive bond-buying program to help spur economic growth.

That marked more than a half-year of record lows. But housing activity has still faltered.

"I have zero purchase deals," said Wisconsin mortgage broker John Stearns. "That's how it's been for months."

Stiff headwinds -- unemployment, foreclosures and tight credit -- are undermining attractive rates and forcing buyers to the sidelines.

Home sales logged their worst summer in decades, with third-quarter sales falling by 21 percent from a year ago, the National Association of Realtors said Thursday. Median home prices fell in half of U.S. cities in the July-to-September period, up from a third in the previous quarter.

1 million homes

And banks are on pace to take back more than 1 million homes this year, foreclosure listing firm RealtyTrac Inc. said Thursday. Recent investigations into faulty paperwork have postponed some foreclosure sales, resulting in a 9-percent drop in home repossessions in October from the previous month.

Major lenders temporarily halted some foreclosures while they reviewed their practices and attorneys general in all 50 states launched a joint investigation into the issue. But many have resumed or plan to resume foreclosures soon.

"While that put a pause in the foreclosure process, that doesn't do anything to help delinquencies," said LendingTree chief economist Cameron Findlay.

Economic woes, such as unemployment or reduced income, continue to be the main catalysts for foreclosures. Borrowers who owe more than their homes are worth are also at high risk and their numbers are rising.

Zillow Inc. said Wednesday that the number of mortgage holders who are "upside down" on their home loans rose in the third quarter to 23 percent. Homeowners with negative equity have a harder time refinancing even though rates are enticingly low.

The average rate on 15-year fixed loans, a popular choice for refinancing, fell to 3.57 percent from 3.63 percent, Freddie Mac said. That's the lowest since the survey began in 1991. The average rate for 30-year fixed loans fell to 4.17 percent from 4.24 percent last week. That's the lowest on records dating back to 1971.

The Federal Reserve detailed plans last week to buy $600 billion in Treasury bonds. The central bank gave more details on Wednesday, saying it plans to purchase $105 billion in Treasurys over the next month. The extra demand means Treasurys will produce lower yields for investors. Mortgage rates tend to track those yields.

To calculate average mortgage rates, Freddie Mac collects rates from lenders across the country on Monday through Wednesday of each week. Rates often fluctuate significantly, even within a single day.

Rates on five-year adjustable-rate mortgages fell to their lowest level in at least five years. They averaged 3.25 percent, down from 3.39 percent a week earlier. It is the lowest rate on records dating back to January 2005.

Rates on one-year adjustable-rate home loans were unchanged at 3.26.

The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount.

The average fee for 30-year and 15-year fixed loans in Freddie Mac's survey was 0.8 point. It was 0.7 point for 1-year and five-year mortgages.