Mortgage rates drop for third week; 30-year at 5.14%
NEW YORK — Mortgage rates dropped for a third consecutive week, reaching their lowest level since late May, a move that bodes well for the hard-hit U.S. housing market.
Average interest rates on 30-year fixed-rate mortgages dropped to 5.14% for the week ended July 16, from the previous week’s 5.20%, according to a survey released on Thursday by home funding company Freddie Mac.
That is the lowest since the week ended May 28, but significantly higher than the record low of 4.78% set the week ended April 2. Freddie Mac started the Primary Mortgage Market Survey in 1971.
The drop in rates is a positive for the housing market, which has been showing some signs of stabilization, with sales rising and home price declines moderating in many regions of the country.
Leif Thomsen, CEO of Mortgage Master in Walpole, Mass., said there is still a sense of nervousness in the market amid rising unemployment, which increases anxiety and decreases confidence in pulling the trigger on home purchases.
“However, on the positive side we have seen a dramatic shift in the business we’re receiving in regards to the ratio of refinancing loans to new purchases,” he said.
Previously, when rates were dropping each day, people rushed to take advantage, generating about 80% of Mortgage Masters’ total business in home loan refinancing, he said.
Thomsen said there is a sense that timing is not going to get much better for buying a home, and people are becoming anxious, he said.
“Our ratio of incoming business right now is closer to 60% purchase loans and 40% refinancing,” he said.
Mortgage rates remained above 5% for a seventh straight week. Experts say mortgage rates at 5% and below are the levels needed to make a significant impact on home loan demand.
Treasury yields, which are linked to mortgage rates, have fallen recently, with mortgage rates responding in kind.
“For a 30-year fixed-rate mortgage, the rate reduction over the past five weeks translates into a monthly payment saving of $56 on a $200,000 loan,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.
Thirty-year mortgage rates had mostly been on a downward trend since the Federal Reserve unveiled its plan to buy mortgage-backed debt in late November. But the Fed met resistance in the bond market.
The Federal Reserve has set a goal to buy up to $1.25 trillion of agency mortgage-backed debt, $300 billion of Treasuries and $200 billion of agency debt in 2009 as part of efforts to lower borrowing costs.
The battered U.S. housing market, which is in the midst of its worst downturn since the Great Depression, is both the source and a major casualty of the credit crisis. A setback for the market could prolong a turnaround for the United States, the world’s largest economy.
Copyright 2009 Reuters Limited.
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