30-Year Rates Dive Below 5% As Sales Continue to Stabilize
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Saturday, October 3, 2009
Rates on 30-year home loans dropped below 5 percent for the first time in four months but remained above this year's record low, Freddie Mac said Thursday.
The average rate on a 30-year, fixed-rate mortgage was 4.94 percent, down from 5.04 percent the previous week, Freddie Mac said. Rates hit a record low of 4.78 percent in the spring.
On Thursday, the National Association of Realtors said the number of signed sales contracts rose in August, the seventh straight monthly increase. "Low mortgage rates are helping to stabilize home sales," said Frank E. Nothaft, Freddie Mac's chief economist.
But borrowers may want to consider the Federal Reserve's announcement last week that it is slowing down a program intended to lower mortgage rates and boost the housing market. Analysts said mortgage rates should remain low for now but eventually are likely to move higher, and homeowners who want to refinance shouldn't delay.
The average rate on a 15-year, fixed-rate mortgage in Freddie Mac's survey fell to 4.36 percent from 4.46 percent last week. This week's rate on 15-year mortgages was the lowest since Freddie Mac started tracking it in 1991.
Rates on five-year, adjustable-rate mortgages averaged 4.42 percent, down from 4.51 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 4.49 percent from 4.52 percent last week.
Borrowers can reduce their interest rates by buying points for 1 percent of the loan amount. The nationwide averages in Freddie Mac's survey were 0.7 points for 30-year mortgages, 0.6 points for 15-year and five-year loans, and 0.5 points for one-year mortgages.
While a federal tax credit for first-time buyers, mortgage rates near 5 percent and lower prices fueled higher demand for new homes, the highest unemployment in 26 years has kept some people from bidding on properties, said Patrick Newport, an economist at IHS Global Insight in Lexington, Mass.
"Low mortgage rates and low prices have brought sales up in some states, while the job market is bringing them down in other places," Newport said in an interview. "That push-pull dynamic will continue as long as unemployment is going up."
Mortgage applications fell last week from a four-month high, led by a decline in purchases. The Mortgage Bankers Association's index of applications to buy a home or refinance a loan fell 2.8 percent in the week ended Sept. 25. The group's gauge of refinancing decreased 0.8 percent, and its measure of purchases dropped 6.2 percent.
