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Mortgage rates hit another record low

For the eighth consecutive week, the average interest rate for a 30-year fixed loan sinks to a new bottom.

August 12, 2010|By E. Scott Reckard, Los Angeles Times

Freddie Mac's survey of interest rates offered by mortgage lenders hit a record low for the eighth straight week, the giant government-supported loan buyer said — 4.44% for a 30-year fixed loan.

Reports of slower-than-expected growth in the private job market quelled inflation fears, making investors more willing to accept lower returns on mortgage securities and therefore the loans backing the bonds, Freddie economist Frank Nothaft said.

The continuing trend has surprised many mainstream economists such as Mark Zandi at Moody's, who said he had thought rates would be moving higher by now.

"Rates are very, very attractive and house prices are very low in most areas of the country," Zandi said. "It is a very, very good time to be a home buyer."

The offering rate of 4.44% for a 30-year mortgage was for solid borrowers paying 0.7% of the loan balance in upfront fees and points, Freddie Mac said. That compared with 4.49% a week ago and 5.29% a year earlier.

Fifteen-year fixed mortgages were being offered at an average 3.92% with 0.6% of the balance paid upfront, down from 3.95% the previous week and 4.68% a year ago.

For variable-rate loans with the first five years fixed, the initial rate was 3.56% with 0.7% in fees this week, down from 3.63% last week and 4.75% a year earlier.

Can the rates go still lower? That has seemed unlikely for months now. But then came this week's decision by the Federal Reserve to buy U.S. government debt to try to help the economy by putting more downward pressure on longer-term interest rates.

"Fixed rates could go lower in the next couple of weeks as the Fed's Treasury purchases and the resulting decline in Treasury yields flows fully through to fixed mortgage rates," Zandi said.

"And rates could move even lower over the next couple of months if the recovery continues to struggle and the Fed responds by increasing its Treasury purchases even more."

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