The recently released Freddie Mac Primary Mortgage Market Survey has shown further drops in the average 30 year fixed mortgage rates. In the week ending November 21, 2012 the average rate was 3.31 percent, a drop of 0.03 percent from the previous weeks 3.34 percent average and a new record low for 30 year fixed mortgage rates. On a year over year basis, 30 year fixed rates were at 3.98 percent at this time last year.
15 year fixed rate mortgages also posted a new low, falling from 2.65 in the prior week to 2.63 percent in the week ending November 21. This same time last year same the 15 year fixed mortgage rate at 3.30 percent.
“Fixed mortgage rates continued to ease somewhat this week to record lows and should help the ongoing housing recovery,”said Freddie Mac vice president and chief economist Frank Nothaft. “Already, new construction on homes was up 3.6 percent in October to the strongest pace since July 2008.”
With mortgage rates at such low levels, more home buyers should be able to reenter the housing market, which is optimistic for the housing recovery. However, a continuing drag on the recovery has been tight lending restrictions at banks which affect both home buyers and small businesses. Alternative lending is growing for small businesses to address the situation, such as the short-term micro loans from Sunovis Financial and its division, The Lending Circle. This product focuses on business health and not credit scores: loans can be approved in as little as 2 to 3 days and funded in as little as 7 days.
Ever since the mortgage crisis of 2008, tight lending restrictions were instituted at banks. These multi-year restrictions have held the residential housing market and businesses from rebounding if the banks became more willing to lend.
Federal Reserve chairman Ben Bernanke said recently at a summit held in Atlanta that it made sense for lenders to have these strict standards immediately after the crisis, but “the pendulum has swung too far the other way.”
If banks were to lower their lending standing marginally, the record low mortgage rates combined with looser lending standards could dramatically spur activity in the housing and business markets. However, this loosening is unlikely until current pending financial regulations that could affect bank capitalization levels are finalized. In addition, bad debt has to be cleared out of the system as well.
The Lending Circle