Mortgage rates fell again this week, Freddie Mac reported, more fuel for… (Freddie Mac )
Fixed mortgage rates fell to new lows for the second straight week thanks to a Federal Reserve stimulus program, with the interest rate for a 30-year mortgage averaging 3.36%, down from 3.4% a week ago, according to the latest Freddie Mac survey of lenders.
Freddie Mac chief economist Frank Nothaft said that in addition to the Fed’s actions, weak economic reports also were driving rates lower. He cited recent downward revisions to the gross domestic product, scant growth in personal incomes and pending home sales numbers for August that came in below expectations.
The Fed’s purchases of long-term fixed-rate mortgage securities pushed the average interest rate for a 15-year fixed mortgage down to 2.69% from 2.73% a week ago.
In an unusual twist, that made the 15-year rate cheaper than the 2.72% start rate for loans with the rate fixed for the first five years that then become adjustable. The last time the average 15-year fixed rate was lower than the five-year hybrid adjustable rate was the week ending Oct. 15, 2009, Freddie Mac said Thursday.
The cheap funds have created the biggest mortgage refinance boom in more than three years, with many homeowners opting for the 15-year loans in order to pay down their loans faster.
Young professionals Nicole and Peter Anderson bought a small Laguna Beach cottage four years ago, then refinanced their 30-year loan last year at 4.25% -- a rate they thought was the deal of a lifetime.
But as rates sank ever lower, they consulted mortgage broker Rick Cirelli, who said the couple could get a 15-year loan at 2.75%. Their monthly payment would rise about $700, but that would help them trade up eventually to a bigger house for their two young sons by shaving an extra $36,000 off their loan balance over the next five years.
Joining a national trend, the Andersons told Cirelli’s RTC Mortgage Corp. to get the papers ready for signing this week.
“I had no intention of doing it again, but I couldn’t pass this up,” Nicole Anderson said Wednesday. “For us it’s worth spending -- I would say investing -- to have more equity in the house.”
Freddie Mac, a giant buyer and guarantor of mortgages, has been on government support since the financial crisis, although it turned a second-quarter profit of $3 billion this year. It was only the fifth quarter since 2008 that the company has not had to request an infusion of federal money to stay solvent.
Freddie Mac asks lenders early each week about the rates they are offering borrowers with good credit and at least 20% down payments, or 20% home equity if the borrowers are refinancing.
In the latest survey, borrowers would have paid 0.6% of the loan amount in upfront lender fees and points on the 30-year fixed mortgage, and 0.5% on the 15-year fixed loan. The survey does not estimate additional closing costs such as appraisals and title insurance.
US 30 Year Mortgage Rate data by YCharts
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