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Rates Drop on Low Inflation Report
Fixed-rate mortgages headed back down this week, reversing last weekâs spike that sent rates to their highest levels since late summer.
Average interest rates on conforming 30-year fixed-rate mortgages, the industry standard, dropped to 3.54 percent this week, down from 3.63 previously, according to todayâs weekly Freddie Mac rate survey. Average rates on 15-year fixed-rate mortgages, popular among those who are refinancing, fell to an average of 2.72 percent, down from 2.79 percent last week
Initial interest rates on 5-year Treasury indexed adjustable-rate mortgages (ARMs) were unchanged at 2.61 percent.
Low inflation keeping rates down
Frank Northaft, Freddie Mac chief economist, said subdued inflation has been keeping mortgage rates in check, noting that increases in the consumer price index has been at or below an annual rate of 2 percent for the past four months. The Federal Reserve also revised its inflation forecast this week, dropping the upper end of the predicted range to 2.8 percent, down from 3.0 percent in December. The Fed continues to expect inflation will average at least 2.3 percent for 2013, same as before.
Freddie Macâs March outlook, released Wednesday, forecasts that 30-year fixed mortgage rates will remain below 4 percent for the remainder of the year.
Further gains expected in housing
The forecast calls for continued improvement in the housing market through the rest of the year, with home sales up 8-10 percent over their 2012 levels, with the strongest spring homebuying season since 2007.
New home construction is predicted to reach 950,000 housing starts, up from 780,000 last year. On the down side, Freddie Mac is predicting that unemployment will remain flat at 7.8 percent owing to reduced federal spending due to the sequestration, which the companyâs analysts say will keep unemployment about 0.25 percent higher than it would have been without the sequester.
First published on MortgageLoan.com at: http://www.mortgageloan.com/rates-drop-low-inflation-report-9400
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