Subdued Inflation Sends Mortgage Rates to New Lows

By:
Peter King | September 02, 2010

Low inflationary pressures allowed mortgage rates to fall to new lows again this week, according to today’s weekly rate survey from Freddie Mac.

Average interest rates on the 30-year fixed-rate mortgage fell to 4.32 percent, down four basis points from last week; 15-year fixed-rate mortgages fell three basis points to 3.83 percent; and the average initial rate on 5-year Treasury indexed adjustable rate mortgages (ARMs) declined to 3.54 percent, down two basis points. A single basis point is equal to 0.01 percent.
 
All three are the lowest average rates ever reported in the weekly Freddie Mac survey, which began tracking 30-year rates in 1971. Fifteen-year rates were added in 1991 and the 5-year ARM in 2005.
 
“The 12-month price growth of core personal expenditures remained at 1.4 percent in July, which kept overall inflation expectations well at bay,” said Amy Crews Cutts, deputy chief economist at Freddie Mac. “Fed chairman Bernanke reiterated this in his August 27th speech in Wyoming, noting that with inflation expectations reasonably stable and the economy growing, inflation should remain near current readings for some time before rising slowly. As a result, mortgage rates eased further this week to new historic lows.”
 
At the same time, Cutts said housing prices appear to be firming, noting that home prices increased 2.3 percent between the first and second quarter of the year, according to the S&P/Case Shiller National Home Price Index, reaching their highest level since the fourth quarter of 2008.

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