Mortgage Rates Hit Historic Low, May Still Not Help California

Mortgage rates fell to an historic low Thursday but it still may not be enough to resuscitate Southern California's ailing housing market.

On Thursday, Freddie Mac said the average rate on a 30-year fixed mortgage dropped from 4.01 percent last week to 3.94, the lowest rate ever. The average rate on a 15-year fixed loan dipped to 3.26 percent, also a record.

But low rates may do little to boost California home sales which have been struggling in a battered economy.

"Credit is still tight and qualifying for loans is still problematic for many people," said Andrew LePage, a spokesperson for DataQuick, a real estate data tracking firm. "There are still a lot of negatives out there like a weak job market and whether housing prices have bottomed out."

In addition, the requirement for higher credit scores and a 20 percent down payment for first-time buyers is making it difficult for many to enter the market.  A lack of confidence in the U.S. economy plus concerns about European markets are also making home investors nervous. 

Rates have been near historic lows for more than a year and have done little to the boost market. This year is shaping up to be among the worst for sales of previously occupied homes in 14 years.

While rates might not improve home sales, it could provide some help to the economy if more people refinance. When homes are refinanced at lower rates, that leaves more money for homeowners to spend on other goods and services.

Consider a homeowner who owes $400,000 and is paying 5.09 percent on a 30-year fixed mortgage. If they refinanced at 3.94 percent, the savings could be over $3200 per year.

But many homeowners with good jobs and stable finances have already refinanced over the past year. Most experts say rates would need to fall at least a full percentage point before it makes sense for a homeowner to pay thousands of dollars in closing costs to refinance again.

The average fee for the 30-year and 15-year rose to 0.8. The average fees for both the five-year and one-year adjustable-rate loans were 0.6 and 0.5, respectively.

Mortgage rates could fall even further now that the Federal Reserve plans to reshuffle its portfolio of securities to try and lower long-term rates.

Follow USA LOCAL NEWS for the latest LA news, events and entertainment: Twitter: @USA LOCAL NEWS // Facebook: USA LOCAL NEWS