Mortgage Rates Back Off Slightly

By:: Kara Johnson | December 23, 2010

Mortgage rates fell back slightly this past week, breaking a run of five consecutive weekly increases that saw rates increase by more than half a percent across the board.

Interest rates on both 30- and 15-year fixed rate loans, as well as initial rates on Treasury indexed adjustable rate mortgages (ARMs), all declined by two basis points this week, according to the Freddie Mac weekly rate survey, released today.

Average rates on 30-year loans declined to 4.81 percent; 15-year loans declined to 4.15 percent and 5-year ARMs fell to 3.75 percent. The figures include an average of 0.7 origination points on the fixed-rate loans and 0.6 points on the ARM.

“Mortgage rates were little changed this week following significant increases over the prior several weeks,” said Frank Nothaft, Freddie Mac chief economist. “Economic reports in December have suggested the economy began regaining momentum towards the end of the year, with consumer spending, industrial production and exports all posting solid gains.”

Nothaft said the outlook for stronger economic growth drove up yields on Treasury bonds, as investors grew willing to take on more risk and prospects for deflation receded. Mortgage rates typically track Treasury yields, as the latter are significant indicators of the cost of lending.

Despite the steep increases in mortgage rates over the past month and a half, Nothaft noted that rates remain well below the point where they started the year. Combined with current low home prices, he said conditions are favorable for an improving market in housing.

Interest rates on all three mortgage loan types hit record lows in the Freddie Mac survey of Nov. 11, and have trended strongly upward since. That week, the average rate reported on 30-year loans was 4.17 percent, 15-year loans were at 3.57 percent and 5-year ARMs were at 3.25 percent.

Fixed-rate mortgages are currently about a quarter of a percentage points below their level of one year ago this week and the 5-year ARM is about two-thirds of a percentage point lower. Average rates on the three loans one year ago this week were 5.05 percent, 4.45 percent and 4.40 percent, respectively.

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National Rates

Loan Type	Today	+/-
30 yr fixed	3.72
15 yr fixed	3.03
5/1 ARM	2.75

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