U.S. mortgage rates fell to record lows again this week, feeding demand for refinancings, as a result of government efforts to reduce rates to levels that will help the hard-hit housing market begin to recover.
Interest rates on 30-year fixed-rate mortgages averaged 4.85 percent for the week ending March 26, down from the previous week’s 4.98 percent.
The rate broke the previous record low of 4.96 percent set 10 weeks earlier, according to Freddie Mac.
The 30-year fixed-rate mortgage is the lowest since Freddie Mac started the Primary Mortgage Market Survey in 1971.
“The Federal Reserve’s announcement that it intends to purchase Treasury securities over the next six months caused bond yields to drop and mortgage rates followed,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.
Low mortgage rates have spurred a surge in home refinancing loans, and resulting lower monthly payments should provide a bit of relief to strapped consumers amid rising unemployment and a shrinking economy.
But the precipitous drop in mortgage rates has made only a marginal impact on demand for loans to purchase a home, offering little sign of a recovery from the worst housing downturn since the Great Depression.
“Everything helps when it comes to the U.S. housing market and lower interest rates on mortgages should make it easier for buyers to enter the market and absorb supply, which is still quite high,” said Lawrence J. White, professor of economics at New York University’s Stern School of Business.
“For existing homeowners who are able to refinance, it should help prevent foreclosures and free up cash,” he said.
Other rates drop
Freddie Mac said the 15-year fixed-rate mortgage averaged 4.58 percent in the latest week, down from 4.61 the prior week.
The 15-year fixed-rate mortgage also reached a record low.
One-year adjustable-rate mortgages, or ARMs, fell to an average of 4.85 percent from 4.91 percent last week.
Freddie Mac said the “5/1” ARM, set at a fixed rate for five years and adjustable each following year, averaged 4.96 percent, compared with 4.98 percent a week earlier.
The 5/1 ARM has never been lower since the span of Freddie Mac’s weekly survey, which dates back to 2005 for the 5/1 ARM.
A year ago, 30-year mortgage rates averaged 5.85 percent, 15-year mortgages were at 5.34 percent and the one-year ARM was at 5.24 percent.
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