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Record-low mortgage rates can't re-energize home sales

WASHINGTON — Mortgages are cheaper today than they've been in a half-century. If only most people had the job security, the credit rating and the cash to qualify for one or refinance.

The average rate for a 30-year fixed loan sank to 4.69 percent this week, beating the low set in December and down from 4.75 percent last week, Freddie Mac said Thursday. Rates for 15-year mortgages also hit lows.

Rates are at their lowest since the mortgage company began keeping records in 1971.

Almost no one expects falling rates to energize the economy, though. Sales of new homes collapsed in May after an enticing tax credit expired.

Rates have fallen over the past two months as investors have become nervous about Europe's debt crisis and the global economy and have shifted money into safe Treasury bonds. The demand has caused Treasury yields to fall. Mortgage rates track those yields.

While mortgages are getting cheaper, low interest rates hurt Americans who are trying to save. Puny rates for savings accounts and CDs are especially hard on people who are living on fixed incomes and earning next to nothing on their money.

Americans usually rush to refinance when rates plummet. But refinancing activity now amounts to less than half the level of early 2009, when long-term rates hovered around 5 percent, according to the Mortgage Bankers Association.

Besides, many people who want to refinance — and are able to — have already done it, said Michael Fratantoni, vice president of research and economics at the trade group. And refinancing costs can total several thousand dollars.

In other economic news from Thursday:

• Initial claims for jobless benefits fell 19,000 last week, the largest drop in two months, but remain above levels consistent with healthy job growth. The Labor Department said Thursday that new claims dropped to a seasonally adjusted 457,000. The stubbornly high level is a sign hiring remains weak even as the economy recovers.

• Businesses spent more on big-ticket goods in May, as manufacturing continued to be a source of strength in the economic recovery. Overall, factory orders for durable goods fell 1.1 percent last month, the Commerce Department said Thursday. But that was largely the result of a drop in demand for commercial aircraft. Excluding the volatile transportation sector, orders rose 0.9 percent after falling in April.

Record-low mortgage rates can't re-energize home sales 06/24/10 [Last modified: Thursday, June 24, 2010 8:25pm]
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