Rates on home loans fell again in the past week. Freddie Mac announced that for the week ending August 11, 30-year fixed rates averaged 4.32%, down from 4.39% the previous week. The average for 15-year fixed fell to a record low of 3.50%. Adjustable rates also moved to record lows, with the average for one-year adjustables 
decreasing to 2.89% and five-year adjustables falling to 3.13%, also a record low. A year ago 30-year fixed rates were at 4.44%. Attributed to Frank Nothaft, Vice President and Chief Economist, Freddie Mac, “Renewed market concerns about the European debt markets led investors to shift funds into U.S. Treasuries, pushing long-term yields lower. Further, in its August 9th Federal Open Market Committee statement, the Federal Reserve noted that economic growth so far this year had been considerably slower than it expected and that overall labor market conditions had deteriorated in recent months, leading the Committee to conclude that an exceptionally low federal funds rate should be maintained at least through mid-2013. These developments helped to ease rates on home loans lower this week. Lower rates will help to maintain the high degree of home-buyer affordability in the market. The National Association of Realtors® reported that its affordability index over the past three quarters has indicated the highest affordability since the inception of the index in 1970.
That said, continual but gradual improvement seems likely. As the economy finds firmer footing, so will mortgage rates. After being pressed to 56-plus-year lows in 2010 by various crises, deflation concerns and government manipulation, we may see a bit of the other side of the coin in 2011. Although the Fed will keep short-term interest rates low, it is unlikely to leave them at emergency levels forever; as the economy recovers, the market will probably demand that the Fed begin to raise short-term interest rates and back off on policy “accommodation” in order to avoid an inflation problem.