Mortgage rates fall to new lows this week
Mortgage buyer Freddie Mac says the average rate on 30-year loans dipped to 3.34%, lowest on records dating back to 1971. That’s down from 3.40% last week and the previous record low of 3.36% reached last month.
The average on the 15-year fixed mortgage also dropped to 2.65%. That’s down from 2.69% last week and also a new record.
The average rate on 30-year loans has been below 4% all year. It has fallen further since the Federal Reserve started buying mortgage bonds in September to encourage more borrowing and spending.
In a speech in Atlanta, Federal Reserve Chairman Ben Bernanke said Thursday that banks’ overly tight lending standards may be holding back the U.S. economy by preventing creditworthy borrowers from buying homes.
Bernanke says some tightening of credit standards was needed after the 2008 financial crisis. But he says “the pendulum has swung too far the other way.” He says some qualified borrowers are being prevented from getting home loans.
Nevertheless, low mortgage rates have helped boost sales of newly built and previously occupied homes this year. Home prices are also increasing, and builders are more confident and starting work on more new homes.
Lower rates have also persuaded more people to refinance. That usually leads to lower monthly mortgage payments and more spending. Consumer spending drives nearly 70% of economic activity.
Still, the housing market has a long way to a full recovery. And many people are unable to take advantage of the low rates, either because they can’t qualify for stricter lending rules or they can’t afford the larger down payments that many banks require.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.
The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans also remained at 0.7 point.
The average rate on a one-year adjustable-rate mortgage declined to 2.55% from 2.59%. The fee for one-year adjustable rate loans one-tenth to 0.3 point.
The average rate on a five-year adjustable-rate mortgage ticked up to 2.74% from 2.73%. The fee was unchanged at 0.6 point.
by Christopher S. Rugaber, Associated Press