Mortgage Rates Hit New Record Lows - Again

By:
Peter King | June 24, 2010
Mortgage rates fell to new record lows across the board this past week, according to the new survey out this morning by Freddie Mac.
 
The average rate on 30-year fixed-rate loans fell to an all-time low 4.69 percent, down from 4.75 percent last week. The current rate is nearly three-quarters of a percentage point lower than the average 5.42 percent that was reported for this same week one year ago.
 
The average on 15-year fixed rate loans dropped to 4.13 percent, another record low, down from 4.20 percent the week before and two-thirds of a percent lower than the 4.87 percent rate one year ago. Five-year Treasury indexed adjustable rate mortgages (ARMs) also set a new record low, with initial rates falling to 3.84 percent, down from 3.89 percent last week and more than a full percent lower than it’s 4.99 percent average of one year ago this week.
 
The only rate in the Freddie Mac report that did not set a new record was the one-year Treasury indexed ARM, which still fell to 3.77 percent, down from 3.82 percent last week, but well shy of the record low of 3.36 percent set the week of March 25, 2004. The one-year ARM had an initial rate of 4.93 percent at this time last year.
 
“Mortgage rates for all but traditional 1-year ARMs hit all-time record lows this week in our survey while activity in housing market slowed in May following the expiration of the homebuyer tax credit,” said Frank Nothaft, Freddie Mac vice president and chief economist. 
 

Home sales down in May

 
Nothaft noted that sales of both new and existing homes dropped unexpectedly in May, with the Census Bureau reporting yesterday that new home sales fell 32.7 percent for the month, the biggest monthly drop on record. The annual sales pace of 300,000 unites was the lowest since the Census Bureau began keeping records in 1963.
 
It should be noted that Census Bureau figures are subject to wide fluctuations and large margins of error. The Bureau emphasizes that three to four months of data are required to establish a trend; however, the size of the decline in May’s figures would seem to indicate that a substantial decline did take place.
 
Existing home sales for the month of May were down a more modest 2.2 percent, according to figures released earlier this week by the National Association of Realtors, but that was in contrast to a roughly 6 percent gain expected by economists, as homebuyers closed sales contract for prior to the April 30 deadline for the federal homebuyer tax credits.
 
The unexpected decline suggests that some purchasers may be having difficulty closing on home loans needed to make the purchases, and that the closing process is being drawn out or perhaps sales are being cancelled outright.
 
The Freddie Mac survey results are based on conforming loans with an 80-percent loan-to-value ratio. All rates reported this week include an average 0.7 points paid, including orignation fees, except for the 15-year loan, which averaged 0.6 points. Results are for the week ending Wednesday, June 23.

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