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Middle East unrest pushes mortgage rates back under 5%

Lenders are offering fixed-rate, 30-year home loans at rates averaging 4.95%, down from 5% last week, Freddie Mac says.

February 25, 2011|By E. Scott Reckard, Los Angeles Times

The average interest rate on a 30-year home loan fell back below 5% this week as unrest in the Middle East pushed down bond yields.

Lenders this week were offering traditional fixed-rate 30-year mortgages at rates averaging 4.95%, down from 5% last week, Freddie Mac said Thursday. To get that rate, borrowers were being asked to pay upfront fees averaging 0.6% of the loan amount.

Turmoil in the Middle East has caused many investors to seek the security of U.S. government bonds, pushing down their market interest rates. Yields on mortgage-backed securities have followed Treasury rates down.

The yield on the 10-year Treasury note dropped to about 3.4% on Thursday. That was down from 3.58% on Friday, before the unrest in Libya intensified, and from 3.74% on Feb. 8.

Freddie Mac's weekly survey asks lenders what they are offering borrowers with good credit and a down payment of at least 20%, or at least that percentage of home equity in the case of refinancings.

Rates for "jumbo" mortgages are generally half a percentage point higher than the rates reported by Freddie Mac, which apply only to loans small enough to be acquired by Freddie or Fannie Mae.

In areas with high housing costs, including Los Angeles and Orange counties, a mortgage of more than $729,750 is a jumbo loan. That will drop to $625,500 on Oct. 1 if Congress, which increased the limit during the financial crisis, doesn't act.

Rates on two other popular types of home loans also edged down this week, Freddie Mac said.

The 15-year fixed-rate mortgage averaged 4.22%, down from 4.27% last week. Upfront fees on that loan type averaged 0.7%.

The start rate for a five-year Treasury-indexed hybrid adjustable-rate mortgage, which has a fixed payment for the first five years, averaged 3.8% this week, with 0.6% in upfront fees. That was down from 3.87% last week.

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