Mortgage Rates Are Falling Again

30-year fixed-rate mortgages hovered around 4 percent this week.

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Mortgage rates are sinking again. Surprised? You shouldn't be. With a debt mess abroad and a debt mess at home, interest rates have once again benefited from investor angst.

That's because mortgage rates track yields on 10-year Treasury notes. As nervous investors have piled into Treasuries on news of the escalating euro zone crisis and the breakdown of the super committee in Washington, yields on government bonds have dropped as demand has increased.

[Read: Federal Housing Administration Could be the Next Housing Bailout.]

Mortgage rates have followed suit. Average rates for 30-year fixed-rate mortgages hovered around 3.98 percent this week, according to Freddie Mac's most recent Primary Mortgage Market Survey, down from 4 percent last week.

The 30-year fixed has averaged at or below 4 percent for four consecutive weeks, and has breached 5 percent only twice this year.

Adjustable-rate mortgages hit new lows, with the 1-year and 5-year Treasury indexed ARMs hovering below 3 percent.

But although October saw a slight pick-up in existing home sales, dirt-cheap mortgages have done little to energize home sales or refinancing activity overall. Economists say 2011 is still stacking up to be the worst year on record for the single-family housing market.

[Read: FHA Loan Limits Get a Boost, but Will It Help Housing Market?]

On the bright side, if other elements of the economy keeping homebuyers on the sidelines improve—employment, home prices—low mortgage rates could be the key to digging the housing market out of the doldrums.

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