Fixed Mortgage Rates Drop to Yearly Lows

Interest rates on home loans have dropped across the board for the third consecutive week.

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""Freddie Mac"":http://www.freddiemac.com reports that the average rate on a 30-year fixed mortgage this week slipped enough to match its lowest mark in 2011, while the 15-year rate fell to a new yearly low.

According to Freddie Mac's ""weekly market survey"":http://www.freddiemac.com/pmms/ rates on 30-year fixed mortgages averaged 4.71 percent (0.7 point) for the week ending May 5, 2011. That's down from 4.78 percent last week. Last year at this time, the 30-year rate was 5.00 percent.

Freddie Mac calculates average mortgage rates each week from data reported by approximately 125 lenders across the country.

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The GSE's latest study puts the 15-year fixed-mortgage rate at 3.89 percent (0.7 point). Last week it was reported to be averaging 3.97 percent, and a year ago it was 4.36 percent.

Adjustable-rate mortgages (ARMs) also headed lower this week. The 5-year ARM came in at 3.47 percent (0.6 point), down from 3.51 percent last week. The 1-year ARM is now averaging 3.14 percent (0.5 point), down from last week's 3.15 percent.

Frank Nothaft, Freddie Mac's VP and chief economist, noted, ""Weaker economic data reports reduced Treasury bond yields and allowed mortgage rates to drift lower for the third consecutive week.""

Nothaft explained, ""For instance, real economic growth in the first quarter fell short of the market consensus forecast and represented the slowest pace since the second quarter of 2010. In addition, both the manufacturing and service sectors exhibited growth at a slower rate in April.""

He says data reports on the housing market, on the other hand, were a little more uplifting, pointing out that the National Association of Realtors reported pending home sales rose in March for the second month in a row to the highest index reading since November 2010.

""Also, the Federal Reserve reported credit standards among commercial banks for prime mortgages were unchanged on net in the second quarter of the year, following two quarters of tightening,"" Nothaft said.