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Mortgage Rates…How Low Can They Go?

Mortgage interest rates continue to head south. ""Freddie Mac"":http://www.freddiemac.com reported Thursday that the 30-year fixed-mortgage rate as well as adjustable rate products all sank to new all-time record lows this week, while the 15-year fixed rate settled in to match its historic low.

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The 30-year fixed-rate mortgage averaged 3.91 percent (0.7 point) for the week ending December 22, dropping below last week's previous record low mark of 3.94 percent. The average 30-year rate is now nearly a full percentage point below its level this time last year of 4.81 percent.

""Rates on 30-year fixed mortgages have been at or below 4 percent for the last eight weeks and now are almost 0.9 percentage points below where they were at the beginning of the year,"" noted Frank Nothaft, Freddie Mac's chief economist.

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Nothaft says all those percentage basis points translate into $1,200 less a year on a $200,000 loan when you compare current rates versus borrowing costs 12 months ago.

The 15-year fixed rate matched last week's all-time record low at 3.21 percent (0.8 point). A year ago at this time, the 15-year rate was averaging 4.15 percent.

Adjustable-rate mortgages (ARMs) also hit new all-time lows in Freddie Mac's survey this week.

The GSE puts the average rate for a 5-year ARM at 2.85 percent (0.6 point) That's down from 2.86 percent last week and 3.75 percent a year ago.

The 1-year ARM came in at 2.77 percent (0.6 point) this week, down from last week when it averaged 2.81 percent. At this time last year, the 1-year ARM was averaging 3.40 percent.

Nothaft says the greater homebuyer affordability afforded by today's rock-bottom interest rates helped push existing home sales higher for the second consecutive month in November to an annualized pace of 4.42 million, the most since January.

Freddie's chief economist also points to positive indicators in the new home sector, with construction of single-family showing a back-to-back monthly gain in November, with the largest increase since June, and homebuilder confidence in December rising to its highest reading since May 2010.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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