The 30 year mortgage rate has dropped to an average of 4.44% on August 12th 2010:
This is a historical all time low:
Treasury rates are also headed south again, to now 2.61%:
These are classical phenomenons of deflation.
This is why I wrote about a year and a half ago:
Treasury yields have developed as expected over the past few months. I expect the same direction for mortgage rates: They will continue to drop much much lower than where they are now. As Treasury yields move toward zero, mortgage rates will drop to between 2% and 3%. Whoever thinks of getting in now to get a “great bargain” should think again and wait.
I said in that post that I expect 30 yr mortgage rates to drop to such low levels because I am drawing from examples from the Japanese deflation.