Mortgage rates at record lows

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Mortgage rates at record lows

Post by lootster »

Mortgage rates at record lows
By Julie Haviv

NEW YORK - U.S. mortgage rates reached new record lows in the latest week as economic data raised the appeal of safe-haven government debt, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.

While rock-bottom rates offer a glimmer of hope for a housing market struggling to find footing in the aftermath of the expiration of popular home buyer tax credits, their impact on home loan demand has been tepid. A weak jobs market and flailing economy continue to weigh on consumer confidence.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.27 percent for the week ended October 7, down from the previous week's 4.32 percent and the lowest on record, according to the survey.

Rates were also below their year-ago level of 4.87 percent. Freddie Mac started the survey in April 1971.

Meanwhile, 15-year fixed-rate mortgages averaged 3.72 percent, down from 3.75 percent last week, the lowest since Freddie Mac began surveying this loan type in 1991

"The 12-month growth rate in the core price index for personal consumption, which the Federal Reserve closely tracks, has been drifting lower over the past six months ending in August and suggests inflation is running at a tepid pace at best," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

"This allowed mortgage rates to ease to new or near record lows this week," he said.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

The Mortgage Bankers Association said on Wednesday U.S. mortgage applications for home purchases rose for a second straight week, with demand at its highest level since early May as potential homeowners took advantage of record low interest rates.

Michelle Meyer, senior U.S. economist at Bank of America Merrill Lynch in New York, said potential homebuyers have remained on the sidelines despite the improvement in affordability from record low mortgage rates.

"The missing link is confidence -- consumers are still worried about future income prospects given high unemployment rates and many believe home prices will fall further," she said. "In addition, credit conditions remain tight, making it difficult to get financing."

"Mortgage rates are only one input into the decision to purchase a home, and seemingly subordinate to current and expected income, she said.

Freddie Mac said rates on 5/1 ARMs, set at a fixed rate for five years and adjustable in each following year, was 3.47 percent, down from 3.52 percent last week, reaching the lowest level since Freddie Mac began tracking this loan type in 2005.

One-year adjustable-rate mortgages were 3.40 percent, down from 3.48 percent last week.

A year ago, 15-year mortgages averaged 4.33 percent, the one-year ARM was 4.53 percent and the 5/1 ARM 4.35 percent.
Would there be any effect locally?
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