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Mortgage Rates Approach Record Lows

Interest rates for 30-year fixed-rate mortgages reached the third lowest rate on record last week after averages fell to 4.93%, mortgage servicer Freddie Mac reported last week. Only the two consecutive weeks of November 26th and December 3rd, 2009 had seen lower rates, with averages of 4.71% and 4.81% respectively.

This week's numbers are based on loans wherein borrowers paid an average of 0.7 of a point; that is, 0.7% of the amount borrowed was paid up front in order to reduce interest rates. On average, a point costs 1% of the loan amount.

Rates for 15-year fixed-rate mortgages experienced a similar drop, falling to 4.33% in the same week. It was also the third lowest rate on record for its category, following a rate of 4.27% the week of November 26th and 4.32% the following week. This assumes a point purchase of 0.6%.

Freddie Mac also reported a slight drop in 5-year adjustable-rate mortgages, which fell from 4.19% to 4.12% this week. One-year ARMs are likewise down, falling from 4.33% to 4.23%. Points paid averaged 0.6 and 0.5 respectively.

Frank Nothaft, chief economist for Freddie Mac, said that despite the drops, other data suggests a slow but steady market recovery. According to the National Association of Realtors (NAR), he said, 48 states saw a rise in home sales, 32 of which were in the double digits. Price growth also rose in 67 metros in the fourth quarter of 2009, he added.

Home building is also showing signs of improvement, particularly in the single-family market. Housing starts in this area rose to 484,000 in January 2010, up by nearly 36% compared to a year ago. The Housing Market Index, provided by the NAR and Wells Fargo, also offered improved forecasts in home building for the first half of 2010.