By Kevin Chiu
Mortgage rates dropped on popular fixed rate loans and hit a new low on adjustable rate mortgages, according to Freddie Mac. The drop in rates sent the 30-year fixed rate average at or below 4% for the fourth straight week.
The loan averaged 3.98%, slipping two basis points from last week, according to the giant mortgage lenders’ survey, which was published a day early this week because of the Thanksgiving holiday. The 5-year Treasury indexed adjustable rate mortgage averaged 2.91% this week, with an average of 0.6 point, down from 2.97% a week ago. The loan fell a full six-basis points from a week ago.
The rate on the 15-year fixed rate mortgage slipped to 3.30% with an average of just 0.7 point, down a single basis point from last week. Rates have been driven lower by concerns about the world economy, including problems in Europe. As a result financial markets have experienced unusually high volatility and Treasury bonds, which are the largest driver of mortgage rates, have stayed near or below 2.00% for most of the week.
The drop in Treasuries and worries over the U.S. economy, including continued weakness in the housing market is prompting banks and mortgage lenders to set mortgage rates for borrowers at some of the lowest levels in years. The 1-year adjustable rate mortgage averaged 2.79%, down a single basis point from the prior week.
“The high degree of home buyer affordability in recent months translated into a 1.4% pick-up in existing home sales during October, according to the National Association of Realtors,” said Freddie Mac chief economist Frank Nothaft. The increase in existing home sales is a positive sign for the troubled marketplace, still suffering from lower home prices in most of the country.
But other economic indicators also showed the U.S. economy remains troubled. The Bureau of Economic Analysis revised third quarter GDP growth downward from its earlier estimate to just 2%. However, a broader analysis shows that the housing market is making adjustments in some areas of the country with lower mortgage rates and is beginning to show signs of improvement.