Mortgage rates continued their descent into uncharted territory this week as investors seeking a safe haven from the European debt crisis snatched up bonds backed by mortgages, and the Federal Reserve continued programs intended to keep a lid on long-term interest rates.
Rates on 30-year fixed-rate mortgages averaged 3.67 percent with an average 0.7 point for the week ending June 7, down from 3.75 percent last week and 4.49 percent a year ago, Freddie Mac said in releasing the results of its Primary Mortage Market Survey. That's a new record low in Freddie Mac records dating to 1971.
For 15-year fixed-rate mortgages, rates averaged 2.94 percent with an average 0.7 point, down from 2.97 percent last week and 3.68 percent a year ago. Rates on 15-year loans have never been lower in records dating to 1991.
Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.84 percent with an average 0.7 point, unchanged from last week but down from 3.28 percent a year ago. Rates on five-year ARMs hit 2.78 percent during the week ending April 19, an all-time low in records dating to 2005.
For one-year Treasury-indexed ARMs, rates averaged 2.79 percent with an average 0.4 point, up from 2.75 percent last week but down from 2.95 percent a year ago. In records dating to 1984, rates on one-year ARMs hit an all-time low of 2.72 percent during the week ending March 1.
"Fixed mortgage rates reached new record lows for the sixth consecutive week as long-term Treasury bond yields declined further following downwardly revised economic growth and job creation data," Freddie Mac Chief Economist Frank Nothaft said in a statement.
Revised numbers show that gross domestic product rose 1.9 percent in the first quarter -- not the 2.2 percent originally reported. The unemployment rate inched up to 8.2 percent in May as the economy added 69,000 jobs, less than half of the market consensus forecast, Nothaft noted.
Although record-low mortgage rates have served as an incentive for homeowners to refinance existing loans, tight underwriting standards and fears about the strength of the economic recovery have kept some would-be homebuyers on the fence.
The Fed also continues to reinvest principal received from its holdings of Fannie Mae and Freddie Mac debt and mortgage-backed securities (MBS) back into agency MBS, and roll over its maturing Treasury holdings at auction.
"These policies have supported the economic recovery by putting downward pressure on longer-term interest rates, including mortgage rates, and by making broader financial conditions more accommodative," Bernanke said.
Although concerns about the European debt crisis and the health of banks in a number of eurozone countries "continue to create strains in global financial markets," Bernanke said, the demand for U.S. exports "has held up well. The U.S. business sector is profitable and has become more competitive in international markets."
Source: Inman News