Low rates, home prices not likely to spur sales

Mortgage rates fell to their lowest level ever this week, while homes became the most affordable they've been in 20 years. Still, said one expert, that won't spur a surge in home sales.

Nationally, the average 30-year fixed rate loan dropped to 4.15 percent, with 0.7 points, and 15-year fixed rate mortgages fell to 3.36 percent, with 0.6 points, according to Freddie Mac, the government's mortgage broker.

Locally, Capital Federal Savings Bank lists its conventional 30-year fixed rate at 4.375 percent with no points and its 15-year loan at 3.5 percent with no points.

Fidelity Bank is offering conventional rates of 4.125 percent for 30 years and 3.25 for 15 years, both without points. Rates are lower for FHA loans.

Rates are falling as investors flee stocks for the safety of U.S. Treasury bonds. Mortgage rates typically follow rates for 10-year Treasury bonds, which were pushed to a record low Thursday.

But low rates and low home prices that would normally spur home buying and home refinancing won't these days, said Lawrence Yun, chief economist at the National Association of Realtors.

The prime culprits, he said, are weak consumer confidence and tighter lending standards by banks.

Banks are being too conservative in lending, Yun said, which means that many prospective homebuyers can't get the very low rates.

"The banks have been raking in profits for the last couple of years, and now have plentiful cash reserves," he said. "They should get back into the business for which they were created."

Mitch Crouch, senior vice president of Pulaski Bank in Wichita and a veteran of the local lending market, said that credit standards are starting to ease up, although still not back to standards typical of the 1980s and '90s.

He said last year the minimum credit score would be about 640, but now that might be closer to 600.

"There is so much money out there that I think standards will have a tendency to loosen up," he said. "It's slow, but it's going in a positive way."

And Crouch had a word of caution: Interest rates tend to move the opposite of people's financial comfort level.

If the stock market and the economy improve, he said, interest rates will rise and the deal of a lifetime could be gone.