After spiking last week, mortgage rates took a dive this week as tension broke out in Europe over the financial crisis in the island country of Cyprus.[IMAGE]
According to ""Freddie Mac's"":http://www.freddiemac.com/ Primary Mortgage Market Survey, the 30-year fixed-rate mortgage (FRM) averaged 3.54 percent (0.8 point) for the week ending March 21, down from 3.63 percent last week. Last year at this time, the 30-year FRM averaged 4.08 percent; it has remained below the 4.00 percent mark for a full year now.
The 15-year FRM this week averaged 2.72 percent (0.7 point), down from 2.79 percent last week.
Adjustable rates were mostly flat. The 5-year adjustable-rate mortgage (ARM) averaged 2.61 percent (0.6 point) this week, the same as before. The 1-year ARM averaged 2.63 percent (0.4 point), down from 2.64 percent previously.
Frank Nothaft, VP and chief economist for Freddie Mac, attributed the downward pressure on fixed mortgage rates to ""low and stable inflation.""[COLUMN_BREAK]
""Annual growth in the consumer price index has remained at or below 2 percent for the past four months, and for the producer price index even lower,"" Nothaft explained. ""This, in part, is why the Federal Reserve monetary policy committee on March 20th lowered the upper end of its inflation forecast for 2013. In addition, our March Outlook calls for 30-year fixed mortgage rates to remain below 4 percent throughout this year.""
""Bankrate.com"":http://www.bankrate.com/ also reported large drops across the board in its weekly rate survey. According to the site, the 30-year fixed averaged 3.78 percent this week, down from 3.85 percent. The 15-year fixed averaged 2.97 percent, down from 3.03 percent.
Unlike Freddie Mac, Bankrate saw a fairly substantial drop in adjustable rates; the 5/1 ARM averaged 2.71 percent, a decline from 2.82 percent last week.
""This week's move in mortgage rates unwound much of the increase seen last week following better news on the job market and the overall U.S. economy,"" Bankrate said in a statement. ""Any time there is nervousness or tension, it tends to be good news for mortgage rates. Conversely, better news on the economic front often means higher mortgage rates.""
If markets were nervous this week, the small Mediterranean island of Cyprus was likely the catalyst.
The European Central Bank issued a warning that it will pull its support of the country's troubled banks if local politicians can't put together a satisfactory bailout plan. One initial plan involved a deposit tax, sparking a bank run as consumers rushed to protect their funds.