Mortgage Rates Drop to Lowest Level in Three Months

Average 30-year mortgage rates dropped to their lowest level in nearly three months this past week, falling to 5.12 percent in the weekly Freddie Mac mortgage rate survey released this morning. The figure is based on an average of 0.7 points paid and is down from 5.29 percent last week. The average 30-year fixed rate one year ago this week was 6.47 percent.

Other rates were down as well: the average rate on 15-year fixed rate mortgages fell to 4.56 percent, down from 4.68 percent last week and 6.00 percent one year ago this week. Meanwhile, five-year hybrid ARMs fell to their lowest rate since January 2005, falling to 4.57 percent, down from 4.75 percent last week and 5.29 percent one year ago.

Freddie Mac Vice President Frank Northaft, the agency's chief economist, attributed the declines to a quarter-percentage point drop in U.S. Treasury bond yields over the previous week, which led a downward trend in overall long-term interest rates overall.

"Low mortgage rates are helping to reinforce the housing market," Northaft said. "New construction on one-family homes rose for the fifth consecutive month in July to an annualized pace of almost 500,000 homes, the most since October 2008. In addition, homebuilder views of housing market conditions for the remainder of the year rose for the second month in a row in August to the most positive reading since June 2008, according to the National Association of Home Builders."

Lower rates also led to a increase in mortgage applications the previous week, according to data released by the Mortgage Bankers Association. The MBA reported that for the week ending Aug. 14, applications for mortgage refinancing rose 6.9 percent, following a similar-sized drop the previous week, and applications for home purchase mortgages rose 3.9 percent.

Overall mortgage applications, for both refinancing and purchases, were up 25 percent from the same week one year earlier, the MBA reported.

The MBA reported that 30-year fixed rate mortgages averaged 5.15 percent in its survey, down from 5.38 percent the week before. The MBA survey covers the week concluding each Friday; the MBA survey covers the week ending on Wednesday (Aug. 18), which accounts in part for their different results. The two surveys also vary in methodology and sampling methods, although the MBA survey usually reports a lower rate than the Freddie Mac survey does; the current week is an exception.