Most Homeowners will miss out on Historic Mortgage Lows

By on | Home & Mortgage Refinance Information.

Despite the fact that 30-year mortgage rates might soon be dropping beyond record lows, few Americans will reap the benefits.

According to a Freddie Mac survey, mortgage rates dropped to 4.32%, the lowest since last November when rates hit a 50-year low of 4.17%.

Due to tightened credit and lending restrictions, the people who would be best served by these super low mortgage loan rates  — homeowners who suffered through the recession – are unlikely to see these rates if they try to refinance their loans.

Most homeowners are paying a rate of around 5%. On a $200,000, 30-year mortgage, a 4.32% rate would save the average American homeowner around $30,000 in interest payments. However, with new lending restrictions, only the well off with high credit will be able to find the lowest rates.

With the economy still struggling, and the recession not too far behind us, most prospective homeowners are using their extra cash to pay off debts or rebuild their savings, instead of jumping into mortgages.

However, a  recent decision by the Federal Reserve might keep home mortgage rates down for the near future. The Fed has announced that they will keep treasury yield interest rates at their current lows through 2013.

Treasury yields and mortgage rates are closely tied together, with mortgage rates typically 1.6% to 1.7% higher than the treasury yields. With the treasury yield currently at a very low 2.24%, many economists expect mortgage rates to follow and drop below 4%, which would be unprecedented.

The low treasury yield is a great sign for investors, unsure of the economy, who want to buy into treasury bonds. Long-time investors, however, may get annoyed by slow returns and push for an increase in mortgage rates to mitigate their sluggish profits.

Whether mortgage loan interest rates continue to drop or remain stable, economists don’t expect much of a boost to the housing market.