If you thought mortgage rates were as low as they could go, think again. Mortgage rates are dropping, this time to a new all-time low.
Average rates for a 30-year fixed-rate mortgage sank to 3.84 percent, Freddie Mac reported Thursday, down from 3.88 percent last week and beating out the previous record low of 3.87 percent in early February this year.
To put things in perspective, averages rates this time last year were almost 1 percent higher.
"Signs of slowing economic growth and inflation remaining subdued allowed yields on Treasury bonds to ease somewhat and brought most mortgage rates to new all-time record lows this week," Frank Nothaft, vice president and chief economist at Freddie Mac, said in a statement.
What do mortgage rates have to do with slowing economic growth and T-bills?
It all has to do with uncertainty and skittish investors. Faced with a shaky economic outlook, investors tend to flood into the safest investment around: treasuries. Mortgage rates tend to follow yields—or returns—on 10-year Treasuries. As demand increases for Treasuries, prices go up and yields go down. When yields on Treasuries go down, rates on mortgages, do, too.
But what's causing all this investor angst?
Recent economic data, while not terrible, hasn't been particularly encouraging. Here in the U.S., gross domestic product—a broad measure of how the U.S. economy is doing—grew 2.2 percent in the first quarter, much lower than many economists predicted, prompting fears that the economic recovery could be flagging.
Jobs numbers, another important barometer of economic health, are also lackluster. Official government numbers come out Friday, but a leading report from ADP showed the private sector added just under 120,000 jobs in April, almost 50,000 jobs less than what experts anticipated.
As if the U.S. didn't have enough problems, economic woes across the pond are also mucking up financial markets. The jobless rate in the euro zone reached an all-time high, according to figures released Wednesday, stoking fears that a recession in Europe could worsen.
While lower borrowing costs are certainly a boon for would-be homebuyers, the new all-time low exposes some serious concerns about the direction of the global economy. While it's hard to believe rates could head further south, with current economic conditions, mortgage rates could still find more space to fall.
Meg Handley is a business reporter for U.S. News & World Report. You can reach her at email@example.com or follow her on Twitter.