The prime lending rate, the interest banks change their biggest and best customers, dropped to 8.5 percent from 9 percent. As a result, average benchmark 30-year fixed mortgage rates eased to 6.98 percent in early February, down from 7.09 percent, according to Freddie Mac's Primary Mortgage Market Survey. A year ago, the 30-year rate was 8.36 percent. Mortgage rates generally have been on a gradual downward slide since mid-May of 2000, when they peaked at 8.64 percent. However, home loan rates looked better in mid-January, when the benchmark average dipped briefly to 6.89 percent.
Lower rates are a good stimulus for housing.
An active housing sector could help to take the edge off a recession, should one occur. However, other experts say housing can't thrive on lower rates alone. Changes in interest rates often spark moves in the stock market, but the unemployment rate and consumer confidence are the keys to the home-buying market. According to housing analyst the Meyers Group, stock market woes and news of layoffs led to a sharp decline in January's Consumer Confidence Index. The number of consumers who said they were planning to buy a home in the next six months dropped to 2.6 percent in January from 3.3 percent in December.