30-Year Mortgage Rate Hits 20-Month Low, Freddie Mac Survey Reveals

Mortgage interest rates, which many experts are expecting to gradually increase throughout the course of the year, continued their downward path this week and once again hit their lowest levels since May 2013, according to the latest data from Freddie Mac.

The Freddie Mac Primary Mortgage Market Survey for the week ended January 22, 2015 shows that 30-year fixed-rate mortgages slipped another three basis points, dropping from 3.66 percent to 3.63 percent. This is almost three-quarters of a percentage point lower than the year-ago average of 4.39 percent. 15-year FRMs were also down, retreating five basis points from 2.98 percent to 2.93 percent, or over half a percentage point lower than the year-ago average of 3.44 percent.

30-Year Mortgage Rate

Despite the Federal Reserve’s decision to cease its bond purchase stimulus in October, rates have actually been gradually moving down, contrary to the expectation that the end of quantitative easing would spur interest rate hikes.

This week’s new 20-month lows in mortgage rates came amid similar record lows posted by bond yields. Fixed mortgage rates are typically tracked against the yield on the 10-year Treasury note, which is now below 2 percent, and at 1.87 percent to be exact as of Wednesday. This is a bit higher from the previous week’s yield of 1.84 percent, and while the yield rate did go up to 1.94 percent, that went back down to 1.86 percent when Europe’s central bank announced its own stimulus plan to boost the Euro zone’s troubled economic situation.

In his weekly statement, Freddie Mac vice president and chief economist Frank Nothaft mentioned a few other factors that influenced this week’s mortgage rate decline. “Mortgage rates continued to fall, albeit at a slower pace, with the 30-year fixed rate mortgage averaging 3.63 percent this week,” he said. “Housing starts picked up in December coming in at a seasonally adjusted 1.089 million unit pace and beating market expectations. Meanwhile, the drop in energy prices pushed the Producer Price Index down 0.3 percent for December and the Consumer Price Index fell 0.4 percent.”

In addition to the above decreases for FRMs, Freddie Mac also reported a decline for 5-year hybrid adjustable rate mortgages, which slipped seven basis points from 2.90 percent to 2.83 percent and were at 3.15 percent a year ago. 1-year ARMs held steady at 2.37 percent, but remained 17 basis points lower than the year-ago 2.54 percent reading.

Contrary to Freddie Mac’s survey, Bankrate reported 30-year and 15-year FRMs rising slightly this past week. 30-year fixed-rate mortgages, which were at 3.80 percent last week, ticked up a single basis point to 3.81 percent, while 15-year FRMs, which were previously at 3.11 percent, moved up eight basis points to 3.18 percent. 5/1 adjustable-rate mortgages were at 3.19 percent, a rather sizable 10 basis point gain from the previous week’s data.

According to Bankrate’s statement, the mortgage rate hike was a bit of a surprise, even as rates remained close to their 20-month lows. “Financial markets continue to be gripped by worries about the global economy, with terrorism and unrest only adding to the concerns,” said Bankrate. “Those concerns, coupled with the expectation of quantitative easing from the European Central Bank, are keeping bond yields and mortgage rates at very low levels.”

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