Average interest rates on 30-year fixed-rate mortgages fell to their lowest level in two and a half months this week, according to figures released today by Freddie Mac.

The average 30-year rate dropped to 4.27 percent this week, according to the company's weekly rate survey, down from 4.34 percent last week. It was the second straight weekly decline for fixed-rate loans and the lowest 30-year rate reported since the first week of February.

Average rates on 15-year fixed-rate loans also fell for a second consecutive week, to 3.33 percent, down from 3.38 percent previously. That was the lowest 15-year rate reported since the week of March 20.

Mixed picture on new home construction

"Mortgage rates continued to ease this week as housing starts rose 2.8 percent in March but not as much as expected," said Frank Northaft, Freddie Mac chief economist. "Also, permits fell 2.4 percent in March to a seasonally adjusted annual rate of 990,000, which followed a slight downward revision of 4,000 permits in February."

The reported rates for 30-year loans include an average of 0.7 points paid in discounts and fees, while 15-year loans averaged 0.6 points.

The average initial rate for 5-year adjustable-rate mortgages (ARMs) also fell for a second straight week, dropping to 3.03 percent from 3.08 percent previously, the lowest reported since March 20.

Mortgage lending at 17-year low

The drop in rates could give a spur to mortgage lending, which Bloomberg reported fell last week to its lowest level in 17 years, largely due to sharply reduced demand for refinancing. Mortgage applications for home purchases were also down by 16 percent last week from the same time one year ago, according to the Mortgage Bankers Association, although there has recently been some increase in demand for loans to finance the purchase of newly constructed homes.

Published on April 17, 2014