Buyers stay on sidelines even if mortgage rate falls to 3 percent

Mortgage rates are regularly plunging to new lows, and the 30-year fixed-rate now sits at about 3.74 percent — a full percentage point less than it was at the same time in 2011. According to CNBC, the rate should continue to its downward spiral and could land at 3 percent, flat.

Mortgage rates follow the yield on the ten-year Treasury note, which just reached a new low today of 1.396 percent. Analysts told CNBC that the yield would drop all the way to 1.25 percent, which, in turn, would further depress mortgage rates.

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But that might not make much difference on the U.S. housing market. “Certainly a 3 percent 30-year fixed would make home buying more affordable for some people that may not qualify at 3.5 percent,” Craig Strent of Maryland-based Apex Home Loans told CNBC, “but if people are not entering the market at 3.5 percent, which is already insanely low, then they may not enter at 3 percent, as they may simply prefer to rent or may not have the down payment needed to buy.”

A 3 percent rate might compel borrowers to refinance though — exactly as last week’s record-low rate did — which could boost the economy by enticing spending. [CNBC]