US mortgage rates post largest drop in 27 years
12/04 01:11 PM
NEW YORK, Dec 4 (Reuters) - Interest rates on U.S. 30-year fixed-rate mortgages plummeted by 0.44 of a percentage point in the latest week, the biggest weekly drop in 27 years, according to a survey released on Thursday by home funding company Freddie Mac (FRE:$0.8649,$0.0449,5.48%) .
This week's decline was the largest since the week of Nov. 27, 1981, when the average 30-year fixed mortgage rate fell by 0.49 of a percentage point, Freddie Mac (FRE:$0.8649,$0.0449,5.48%) said.
Interest rates on the 30-year fixed-rate mortgage averaged 5.53 percent for the week ending Dec. 3, down from the previous week's 5.97 percent, Freddie Mac (FRE:$0.8649,$0.0449,5.48%) said in its weekly Primary Mortgage Market Survey.
The 30-year fixed-rate mortgage has not been lower since Jan. 24, 2008, when it was 5.48 percent, the company said.
The U.S. housing market is suffering the worst downturn since the Great Depression as a huge supply of unsold homes, tighter lending standards, and record foreclosures push down home prices.
But lower interest rates on mortgages could help buoy the hard-hit sector. They have already spurred a surge in applications for home purchase and refinancing loans. For details, double-click on [ID:nN03330085]
FED'S HELPING HAND
Interest rates dropped dramatically after the Federal Reserve unveiled a plan last week to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises, Fannie Mae (FNM:$0.8707,$0.0307,3.65%) <FNM.N>, Freddie Mac (FRE:$0.8649,$0.0449,5.48%) <FRE.N> and Ginnie Mae.
Interest rates on 30-year fixed-rate mortgages fell for a fifth consecutive week, but the decline last week paled in comparison at only 0.07 percentage point.
"After Federal Reserve actions to increase liquidity in the mortgage market, interest rates for fixed-rate mortgages (FRMs) took a dive," Frank Nothaft, Freddie Mac (FRE:$0.8649,$0.0449,5.48%) vice president and chief economist, said in a statement.
Thirty-year fixed mortgage rates are now almost a full percentage point lower than they were in the last week in October, he said.
The Fed also said it will buy up to $100 billion of debt issued by Fannie Mae (FNM:$0.8707,$0.0307,3.65%) , Freddie Mac (FRE:$0.8649,$0.0449,5.48%) and the Federal Home Loan Banks.
The 15-year fixed-rate mortgage averaged 5.33 percent, down from 5.74 percent. The 15-year fixed-rate mortgage has not been lower since March 20, 2008, when it averaged 5.27 percent, the company said.
One-year adjustable rate mortgages, or ARMs, fell in the week to an average of 5.02 percent from 5.18 percent last week.
Freddie Mac (FRE:$0.8649,$0.0449,5.48%) said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.77 percent, compared with 5.86 percent a week earlier.
A year ago, 30-year mortgage rates averaged 5.96 percent, 15-year mortgages were at 5.65 percent and the one-year ARM was at 5.46 percent. The 5/1 ARM averaged 5.75 percent.
Lenders charged an average of 0.7 percent in fees and points on 30-year mortgages, unchanged from the previous week.
Fees and points averaged 0.7 percent on 15-year mortgages, unchanged from the previous week. The 5/1 ARM and one-year ARM fees and points were 0.6 percent and 0.5 percent, respectively, unchanged from the previous week.
Freddie Mac (FRE:$0.8649,$0.0449,5.48%) is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio.
