Average Mortgage Rates Fall, Another Nudge for Revival

After increasing steadily for weeks, the average rate of fixed mortgages fell in the U.S., further fuelling a rebound in the housing sector.

Mortgage buyer Freddie Mac’s Primary Mortgage Market Survey showed the 30-year fixed-rate mortgage average at 3.59 percent, down from last week’s 3.66 percent. The 15-year fixed mortgage average too fell from 2.89 to 2.86.

Frank Nothaft, vice-president and chief economist, Freddie Mac, said in a statement that the recent drop was due to low bond yields.

“Treasury bond yields fell, allowing mortgage rates to follow, after the release of the July 31st and August 1st minutes of the Federal Reserve’s monetary policy committee," Nothaft said. "Committee members agreed that economic activity had decelerated more in recent months than they had anticipated at their last meeting in June. Some members even saw room for additional stimulus fairly soon if needed."

Decreasing mortgage rates are one of the factors propelling the U.S housing market. Over the past couple of months, the market has remained upbeat with home sales rising 3.6 percent in July. The pending existing home sales also rose in July to its highest rate since April 2010.

But despite a decrease in mortgage rates, a Mortgage Bankers Association survey showed that applications filed for new mortgages dropped 4.3 percent compared to previous week. On the refinance front, mortgage activity decreased to 79 percent from last week’s 80 percent.

However, adjustable mortgage rates increased to four percent of total applications. This increase shows that many buyers are now opting for adjustable-rate mortgages, especially among affluent borrowers, CNN reported.

The report showed that the spread between rates on a 30-year fixed-rate mortgage and an adjustable-rate mortgage is more than double of what it was five years ago. “That means homeowners who are planning to either move or pay off their mortgage over the next few years can save big with an ARM,” the report said.