Another round of new lows for mortgage rates
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Interest rates for fixed-rate home loans scraped to new record lows this week as concerns about the sluggish economic recovery drove down yields on the benchmark 10-year Treasury bond.
For a 30-year fixed-rate loan, the typical rate being offered by lenders was 4.56%, according to a survey released Thursday by Freddie Mac. That was down from 4.57% last week and 5.20% a year ago.
On 15-year fixed mortgages, a popular option in the refinance market, rates averaged 4.03%, down from 4.06% a week earlier and 4.68% a year ago.
Borrowers would have paid 0.7% of the loan amount in upfront fees to the lender to obtain the rate.
Not since the 1950s have mortgage rates been so low. The rates are the lowest since Freddie began tracking the 30-year fixed in 1971 and the 15-year in 1991.
Worries about the economy have caused demand to surge for ultra-safe U.S. Treasury securities, with the yield on the 10-year note just above 2.9% on Thursday, a percentage point lower than a year ago. Most fixed-rate mortgages wind up backing bonds issued by Freddie and Fannie Mae, whose interest rates rise and fall along with the 10-year bond.
The weekly survey by Freddie Mac asks lenders what rates they are offering on loans up to $417,000 for borrowers with solid credit, verifiable income and 20% down payments for purchases or equivalent equity for a refinance. The lenders also estimate the upfront fees these borrowers would pay. Borrowers who shop around often obtain lower rates, and paying additional fees can ‘buy down’ the interest rate.
The loans in the survey are those that the government-sponsored mortgage giants -- Fannie and Freddie -- would buy or guarantee. As the Mortgage Bankers Assn. noted in a separate survey this week, those mortgages are now being used overwhelming by homeowners refinancing their homes to lock in the lowest fixed rates since the 1950s.
The number of home-purchase loans continues to lag, however, with so-called government loans accounting for much of the volume. Unlike the loans described in the interest rate survey, these Federal Housing Administration and Veterans Administration mortgages feature low down payments.
“Refinance borrowers, aiming for the lowest possible rate, are getting conventional loans,’ said Michael Fratantoni, the trade group’s vice president for economics and research. ‘The strength in purchase applications comes from government loans, likely indicating that prospective buyers are drawn by the lower down payment requirements.”
-- E. Scott Reckard
