Mortgage Rates: Which Way Will They Go?

Is the lowest mortgage rate that Freddie Mac ever recorded poised to rise or fall? Take oursurvey, and see what <I>TheStreet</I> thinks.
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(Mortgage rates poll article updated with new housing market forecasts from Freddie Mac chief economist, Frank Nothaft.)



) -- Last week,

Freddie Mac


reported the lowest mortgage rates ever recorded.

The 30-year-fixed mortgage rate, which it has been collecting since 1971, was at 4.56%, down from 4.57% the week before. A year ago at this time the rate was at 5.2%.

The 15-year-fixed mortgage rate averaged 4.03% last week, down from 4.06% the week before and 4.68% a year ago.

While it might appear, in light of this, that now would be a great time to buy a house, consumers are apparently lacking the confidence needed to make a big purchase. After federal tax credits for homebuyers expired April 30th the housing market weakened. The National Association of Realtors reported

a 5.1% drop in existing home sales

in June.

"If an $8,000 tax credit didn't get you to buy a house, then the incremental $60 a month savings from lower mortgage rates isn't going to do it either," said Greg McBride, senior financial analyst at

McBride explained that low mortgage rates cannot boost the housing market alone, and many potential buyers are struggling with job uncertainty -- and when buyers aren't sure of what their income prospects are going to be over the next few years, they aren't willing to take a risk.

Of course, as jobs are created and the economy ultimately recovers, home sales are expected to return to a sustainable healthy level.

"Despite these market swings, total annual home sales are rising above 2009 and we're looking for overall gains again this year as well as in 2011," said Vicki Cox Golder, president of the NAR. "Conditions have become more balanced in much of the country, which is good for both buyers and sellers."

>>New Home Sales Rise 23.6%

Frank Nothaft, the chief economist at Freddie Mac, believes, for his part, that the housing market is going to slowly recover. "We've reached the bottom," Nothaft said. "We're not going to go any lower. And gradually, over the course of the next year, we'll see housing market activity increase."

Nothaft added that in December of 2009, he refinanced his house because he thought mortgage rates were the lowest they would ever be in his lifetime; however, they continued to fall. In May, many forecasts predicted that mortgage rates couldn't possibly drop any lower. Now, with rates at historic lows, can they go lower still? "No one can say where the mortgage rates are going to be six months from now," McBride said, "but it's safe to say they are still going to be very attractive."

Where do you think mortgage rates will be this week? Take our poll to see what



-- Reported by Theresa McCabe in Boston.

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