The benchmark U.S. mortgage rate fell last week to its lowest level in more than three months, Freddie Mac reported.
The average rate on a 30-year fixed-rate mortgage dropped to 7.04 percent in the week that ends tomorrow, from the previous week’s 7.05 percent, according to a weekly survey of mortgage rates from Freddie Mac.
The latest level was the lowest since the week ended Feb. 20, when the 30-year mortgage rates was 6.99 percent, according to Freddie Mac. The highest level so far this year for mortgage rates was 7.22 percent, reached during the week ended May 1.
“For the past eight months, mortgage rates have been available at about 7 1/4 percent or less, and this trend will carry through the summer months,” said Frank Nothaft, deputy chief economist at Freddie Mac.
Moreover, in light of Federal Reserve Chairman Alan Greenspan’s remarks last week, “we should see a continuance of low mortgage rates,” said Nothaft.
Greenspan told a Congressional panel the U.S. economy will probably slow and inflation remain tame in the months ahead.
“The effects of the crisis in Asia will almost certainly damp net exports further, potentially moderating the growth of domestic production and hence employment,” Greenspan told the Joint Economic Committee of Congress.
“The economy is enjoying a virtuous cycle” as workers earn more without wage inflation gaining “a significant toe-hold,” he said.
The lastest mortgage report also showed that the average rate on an adjustable mortgage was 5.71 percent, up from 5.68 percent; while 15-year mortgage rates rose to 6.71 percent, from 6.70 percent.
Low rates have been a big boost for the housing market. New homes sales rose 5.2 percent to a record annual rate of 888,000 units in April–fueled entirely by sales in the South–after falling a revised 4.2 percent to a 844,000 pace in March, the Commerce Department said earlier this month.
The government also reported U.S. builders put the finishing touches on 2.8 percent more homes in April, pushing the total number of housing completions to a seasonally adjusted annual rate of 1.530 million. That’s the highest level since February 1997, when completions were at an annual rate of 1.570 million units.
In the week ahead, Commerce Department figures will likely show construction starts of new homes rose 1.2 percent in May to an annual rate of 1.557 million units, according to a Bloomberg News survey of 17 analysts.
In April, housing starts fell 2.3 percent to a 1.538 million-unit annual rate. April marked the eighth straight month that starts exceeded 1.5 million at an annual rate. That’s the longest stretch at that level since a 55-month run from May 1983 through November 1987.
U.S. mortgage applications increased in the latest week as mortgage rates hovered around 7 percent, the Mortgage Bankers Association of America said.
The MBA’s mortgage applications index rose 0.7 percent to 396.6 in the week ended June 5 from 393.9 the previous week. The refinancing index fell 4.6 percent to 1120.7 from 1174.3 the previous week, while the purchase index–which gauges demand for new houses–rose 4.7 percent to 272.1 from the previous week’s 259.8, the MBA said.
All the percentages are seasonally adjusted changes from the previous week’s index level.
Since early January the overall applications index held above last year’s high of 348.3, reached during the last week of October, according to Bloomberg News analytics.
The refinancing index remained below its highest point for the year of 3115.8, reached during the third week of January; and the purchase index has ranged this year between 217.20, reached the second week of March, and 313.4, reached in late January.
Because the U.S. economy continues to expand, banks and other companies that buy home loans–including Freddie Mac, Fannie Mae and INMC Mortgage Holdings Inc.–could see a steady stream of available mortgages.
Freddie Mac’s weekly survey measures the national average commitment rate for 80 percent loan-to-value mortgage loans during a one-week period. It doesn’t include points, the financing charges that consumers can pay initially to lower the annual interest rates on their mortgages.
