15-year mortgage rates still at record low, Freddie Mac says
Interest rates are creeping back up for 30-year mortgages, but they remain at record lows for 15-year loans, helping to drive a surge in the refinance business.
A report from Freddie Mac says the lenders it surveyed this week were offering 15-year fixed-rate home loans at an average of 3.82%, down from 3.83% a week earlier. That was the lowest rate since the big mortgage finance company started tracking these loans in 1991. Borrowers would have paid 0.6% of the loan amount upfront to the lenders, Freddie said.
The average rate for 30-year fixed-rate loans was 4.37% with 0.7% in lender fees, up slightly for the second week in a row after bottoming out at 4.32% in the Sept. 2 survey. Starting interest rates on variable loans also remained at or near record lows, according to the survey, which was released Thursday.
Despite the exceptionally low rates, application for mortgages to purchase homes have lagged since federal tax credits for home buyers expired last spring. The Mortgage Bankers Assn. is reporting that four of every five applications for home loans are for refinancing existing home debt.
That has created a refinancing boom, although it's not as big a surge as last year, when 30-year mortgage rates first cracked the 5% barrier, said Guy Cecala, publisher of Inside Mortgage Finance Publications in Bethesda, Md.
However, a greater percentage of all residential mortgages this year are 15-year loans, which are used almost entirely for refinancings.
Inside Mortgage Finance said that during the first half of 2010, Fannie Mae and Freddie Mac issued $67.9 billion in securities backed by pools of 15-year mortgages. That was 17% of the $394.8 billion in total mortgage bonds issued during that time by the government-backed home loan specialists.
Through the first six months of 2009, Fannie and Freddie issued $93.8 billion in bonds backed by 15-year mortgages, 13% of a total of $719.3 billion in mortgage-backed bonds.
The Freddie Mac survey asks lenders to report what they are offering on loans of up to $417,000 to borrowers with good credit, enough income to support loan payments and at least 20% in home equity or for a down payment. In addition to lender or broker fees, borrowers generally must foot the bills for third-party services such as appraisals and title insurance.
Solid borrowers often negotiate slightly better rates than those reflected in Freddie's survey. Borrowers willing to make additional upfront payments called points can obtain lower rates; rates are higher for loans with no upfront costs. People who can't jump the 20% equity hurdle or have loans too large to be backed by Fannie and Freddie also have to pay higher rates.
-- E. Scott Reckard