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Freddie Mac: 30-year mortgage rate down a tick at 3.78%

May 24, 2012|By E. Scott Reckard
  • New home for sale in Springfield, Ill. Sales of new homes are improving and record low interest rates have made housing more affordable, but the bulk of mortgages written this year are expected to be for homeowners refinancing their existing loans.
New home for sale in Springfield, Ill. Sales of new homes are improving and… (Seth Perlman / Associated…)

Record low interest rates for 30-year mortgages edged down another tick, Freddie Mac said in its latest survey, which showed lenders across the nation offering the benchmark loan at 3.78% compared to 3.79% last week. The typical rate on a 15-year fixed loan held steady at 3.04%.

Sales of new homes were rising in a recent survey, with the low rates helping to make housing more affordable.

But many homeowners are trapped in homes worth less than their mortgages, restraining home resales and holding back the recovery in the housing markets.

Reflecting the bargain home-loan rates, the Mortgage Bankers Assn. on Thursday increased its mortgage origination forecast for 2012 by almost $200 billion — but attributed the greater volume entirely to an increase in borrowers refinancing existing loans.

The trade group now expects $1.28 trillion in mortgages to be written in 2012, up from $1.26 trillion in 2011. Refinance transactions are expected to total $870 billion, about the same as in 2011, while the forecast said purchase loans would drop from $415 billion to $409 billion.

Mortgage Bankers Assn. economist Mike Fratantoni said market turmoil in Europe and slower economic growth globally continue to depress the yield on the 10-year U.S. Treasury note, which serves as a benchmark for fixed-rate mortgages.

“Thus, we are projecting lower U.S. mortgage rates for the rest of the year and raising our refinance forecast as a result,” Fratantoni said.

The survey by Freddie Mac, the giant government-supported loan buyer, asks lenders what terms they are offering to borrowers with good credit and down payments of 20% for home purchases or at least 20% home equity if they are refinancing.

Freddie Mac said the average start rate for a one-year adjustable-rate loan averaged 2.75% this week, down from 2.78% the previous week. For “hybrid” loans that become adjustable after five years at a fixed rate, the typical start rate was unchanged this week at 2.83%.

The Freddie Mac survey assumes that borrowers pay relatively little in upfront fees and points to the lenders. In the latest survey, borrowers would have paid on average 0.8% of the loan amount for the 30-year fixed loan, 0.7% for the 15-year fixed loan, 0.6% for the 5-year hybrid mortgage, and 0.4% for the home loan that adjusts annually.

Borrowers can “buy down” mortgage rates by paying additional discount points to lenders. They also muct often pay additional closing costs not included in the Freddie Mac survey.

RELATED:

Mixed results for Obama refi plan

Sales of new homes rose 3.3% in April

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