Mortgage rates plummet to record lows

Mortgage rates Thursday hit their lowest levels since Freddie Mac began compiling them in 1971.

Weighed down by a string of shaky economic developments, the 30-year fixed interest rate fell to 4.69 percent, the 15-year fixed rate stopped at 4.13 percent and the five-year adjustable dropped to 3.84 percent, all records in the weekly numbers published by the agency. The one-year adjustable rate was 3.77 percent, short of the 3.76 percent record in May 2004.

The downward trend is counter to lenders' predictions in early April. That was after the federal government had stopped buying mortgage-backed securities, which had been freeing up capital for lenders to lend and kept rates artificially low.

But the economies of Greece and other European Union countries sank. Then home contracts and new home construction fell further than expected after a major deadline for a home buyer tax credit expired on April 30. Last month's jobless rates grew or barely wavered.

"Bad news on the economic front is good news on mortgage rates," said Mike McHugh, head of Continental Home Loans in Melville. The bad news led to more investors pursuing Treasury bonds, which are generally considered safer than stocks and real estate, driving the yields on the bonds down.

Because both fixed and adjustable rates track Treasury bond yields, among other things, the cost of lending fell also.

With rates lower in the past two weeks, about 200 loan applicants have contacted Continental to lock in interest rates, McHugh said, but much of that is due to the June 30 deadline for closings to get a tax credit of up to $8,000.

For home buyer Jim Maire of Sound Beach, the downward trend is good news, but he can't rejoice yet. His new family home, being built in East Moriches, won't be ready until September. When it's time to lock in a rate, in a month or so, he said, he will be happy with one that hasn't risen too much from the 5.25 percent his lender discussed.

"I don't sit and watch the numbers go up and down," the father of two said. "We're living within our means, which is the bottom line here."