Mortgage Interest Rates Falling, Hit 20-Month Lows in Latest Freddie Mac Survey

Mortgage interest rates continued retreating to their pre-“summer spike” or “taper tantrum” levels, as 30-year fixed-rate mortgages hit their lowest levels in almost 20 months in Freddie Mac’s most recent Primary Mortgage Market Survey.

According to Freddie Mac, 30-year fixed-rate mortgages averaged 3.66 percent as of the week ended Thursday, January 15 – this is seven basis points lower than last week’s 3.73 percent average, and exactly three-quarters of a percentage point than the year-ago figure of 4.41 percent. This rate for 30-year FRMs is also the lowest rate in Freddie Mac’s records since the week ended May 23, 2013. Likewise, 15-year FRMs slipped from 3.05 percent to 2.98 percent, another drop of seven basis points, and one that pushed this mortgage type underneath the key 3 percent threshold for the first time since the last week of May 2013. One year ago, 15-year fixed-rate mortgages were almost 50 basis points higher, at 3.45 percent.

Freddie Mac Mortgage Rates

Also retreating were adjustable-rate mortgages, as 5-year hybrid ARMs finished the week at 2.90 percent, down from 2.98 percent last week and 3.10 percent last year, and 1-year ARMs closed at 2.37 percent, down from 2.39 percent last week and 2.56 percent last year.

“Mortgage rates fell for the third consecutive week as oil prices plummeted and long term treasury yields continued to drop despite a strong employment report,” said Freddie Mac vice president and chief economist Frank Nothaft in his weekly statement. “The economy exceeded expectations by adding 252,000 jobs in December, which followed an upward revision of 50,000 jobs to the prior two months. The unemployment rate fell to 5.6 percent, which was the lowest since June 2008.”

Instead of pulling mortgage rates to a stratospheric rise, the Federal Reserve’s cutback and eventual cessation of its quantitative easing stimulus has actually taken mortgage rates downward, contrary to what many analysts and economists had expected. Many of these experts felt that 30-year FRMs, which were above 4.50 percent on most surveys in December 2013, would go well beyond 5 percent by the end of 2014, which did not happen at all.

However, experts still feel an increase in mortgage rates is due this current year, with the Fed planning to raise overnight rates by late 2015, though 30-year FRMs may not go anywhere past 4.80 percent or 4.90 percent for an extended period of time.

As Nothaft pointed out above, mortgage rates went down in Freddie Mac’s survey despite an upbeat employment report. However, other sources had explained earlier in the week that global economic concerns have been a key variable pushing mortgage rates down, as a weak Euro and other worries have been one reason why interest rates have not just been trending downwards, but also a bit volatile in nature.

In its own weekly report, Bankrate said that 30-year FRMs fell further down and farther away from the 4 percent mark, with average rates ending the week at 3.80 percent, down from last week’s 3.85 percent. 15-year FRMs lost five basis points from 3.16 percent to 3.11 percent, while 5/1 ARMs dipped down by a rather significant 11 basis points, moving from 3.20 percent to 3.09 percent.