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If Chicken Little went around saying, “mortgage rates are falling, mortgage rates are falling,” over and over, all the farm animals would probably not have believed him because of all that business with the sky. But since this repeated alert is coming from Freddie Mac, we’re paying attention!

Just like last Thursday’s Freddie Mac weekly Primary Mortgage Market Survey® (PMMS) reported, rates have dropped to new, unprecedented, never-before-recorded lows. The only exception being the 5-year ARM, which ticked up a bit, but still remains at a fairy-tale-like level in 2 percent territory.

According to this week’s PMMS, lenders across the United States averaged 30-year fixed rates of 4.09 percent with 0.7 points – down from the record low 4.12 percent recorded last week. And the 15-year fixed mortgage averaged 3.30 percent at 0.6 points, down slightly from 3.33 last week. The average on a 5-year ARM was 2.99 percent with 0.6 points – up a bit from it’s astonishing low of 2.96 percent last week.

Why are mortgage rates at fable-worthy levels? Well, Frank Nothaft, vice president and chief economist of Freddie Mac, has this story to tell:

“Continued investor concerns over the state of the European debt markets kept U.S. Treasury bond yields low and allowed mortgage rates to ease once more this week.  In comparison, the average interest rate of mortgages outstanding in the second quarter was 5.28 percent. Apart from just fixed-rate mortgages, various other interest rates are at or near all-time historical lows as well.”

Nothaft, the Prince Charming of Mortgage Rates himself, goes on to say, “By refinancing into today’s 30-year fixed mortgage, homeowners could shave almost $1,715 a year in interest payments on a $200,000 loan.”

So what’s the moral to this Mortgage Rates Tale? Those in the market to refinance or buy a new home will all be living happily-ever-after if they take advantage of these market conditions.

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