OfflineUpdated Feb 6th 2014 2:54PM
weekly mortgage rates freddie mac
Daniel Acker/Bloomberg via Getty Images
WASHINGTON -- Average U.S. rates for fixed mortgages fell this week as the latest data continued to indicate a pause in the housing market's recovery.
Mortgage buyer Freddie Mac said Thursday the average rate for the 30-year loan declined to 4.23 percent from 4.32 percent last week. The average for the 15-year loan slipped to 3.33 percent from 3.40 percent.
Mortgage rates have risen about a full percentage point since hitting record lows roughly a year ago. The increase was driven by speculation that the Federal Reserve would reduce its $85 billion a month in bond purchases. Saying the economy was gaining strength, the Fed pushed ahead last week with a plan to reduce the bond purchases, which have kept long-term interest rates low.
Data released Tuesday by real estate specialist CoreLogic (CLGX) showed that U.S. home prices slipped from November to December, and the year-over-year increase slowed, likely a result of weaker sales at the end of last year.
The December decline was the third straight month-to-month drop. Home prices had risen for eight straight months through September. For all of 2013, prices rose a healthy 11 percent.
The Commerce Department reported Monday that U.S. construction spending rose modestly in December, slowing from healthy gains a month earlier.
Most economists expect home sales and prices to keep rising this year, but at a slower pace. They forecast that both will likely rise around 5 percent, down from double-digit gains in 2013.
Steady job gains are putting more people to work and enabling them to buy a home. And rising prices should encourage more owners to sell their homes. A larger supply of available homes would likely boost sales.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country 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 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan rose to 0.7 point from 0.6 point.
The average rate on a one-year adjustable-rate mortgage fell to 2.51 percent from 2.55 percent. The fee increased to 0.5 point from 0.4 point.
The average rate on a five-year adjustable mortgage slipped to 3.08 percent from 3.12 percent. The fee held at 0.5 point.
Here's a look at rates for fixed and adjustable mortgages this week and over the past year. (All values in percentage points):
Loan type Current avg. Last week 52-week high 52-week low
30-year fixed 4.23 4.32 4.58 3.35
15-year fixed 3.33 3.40 3.60 2.56
5-year adjustable 3.08 3.12 3.28 2.56
1-year adjustable 2.51 2.55 2.71 2.51
Source: Freddie Mac Primary Mortgage Market Survey..AP
Homebuyers are benefiting from an unexpected drop in mortgage rates that defied forecasters who said the Fed’s move to taper its economic stimulus program would cause rates to jump.
The average rate for 30-year fixed mortgages dropped to 4.23% last week—an almost three-month low, according to Bloomberg, and 0.3 percentage points beneath what rates were to start 2014.
“I was surprised by what happened in the bond market,” Douglas Duncan, chief economist at Fannie Mae, told Bloomberg. “Everyone was surprised. It was completely unexpected that mortgage rates would fall after the Fed began tapering.”
In December 2013, the Federal Reserve announced a $10 billion taper to its quantitative easing program, which has been purchasing $85 billion of mortgage-backed securities. While widely expected this would cause mortgage rates to increase in 2014′s first quarter, the opposite has happened, benefiting prospective home-buyers.
“People are getting a second chance, and that is bound to give a boost to the housing market,” Sam Khater, deputy chief economist at CoreLogic Inc., said in the article. “It’s not a game changer unless the emerging markets situation worsens and rates get even cheaper.”
Fannie Mae, Freddie Mac, the Mortgage Bankers Association, and the National Association of Realtors are among those with January forecasts that mortgage rates would increase by at least 0.3 percentage points in the quarter, Bloomberg reports.
“Instead, yields on 10-year Treasuries, which are used as a benchmark for mortgage rates, shrank as investors drove up bond prices,” says the article.
The Federal Reserve’s new chair, Janet Yellen, stated during a recent Congressional hearing that the Fed will continue on its planned course to taper QE, and only a “notable” economic outlook change would slow the pace of the wind-down.
Still, the drop in rates isn't expected to last.
“For someone in the market to buy, it’s an opportunity to turn back the clock on rates, but there’s no indication it’s anything but a temporary reprieve,” said Duncan. “In the long-run, the Fed’s exit means sustained upward pressure on rates.”bloomburg