BUSINESS

Average rate on 30-year mortgage falls to 3.66 pct, lowest since May 2013; 15-year below 3 pct

01/15/2015 03:47 EST | Updated 03/17/2015 05:59 EDT
WASHINGTON - Average long-term U.S. mortgage rates fell for the third straight week, with the benchmark 30-year rate again marking its lowest level since May 2013. The average for a 15-year mortgage, a popular choice for people who are refinancing, dipped below 3 per cent for the first time since then.

Mortgage company Freddie Mac said Thursday the nationwide average for a 30-year mortgage slid to 3.66 per cent this week from 3.73 per cent last week. The rate for the 15-year loan declined to 2.98 per cent from 3.05 per cent last week.

The ongoing decline in rates lured a crop of prospective buyers, as applications for mortgages marked their biggest weekly gain last week in over six years. Applications jumped 49.1 per cent, the biggest weekly increase since November 2008, according to the Mortgage Bankers Association.

A year ago, the 30-year mortgage stood at 4.41 per cent and the 15-year mortgage at 3.45 per cent. Mortgage rates have remained low even though the Federal Reserve in October ended its monthly bond purchases, which were meant to hold down long-term rates.

The drop in mortgage rates has come as bond yields have hit record low levels. Mortgage rates often follow the yield on the 10-year Treasury note, which has fallen below 2 per cent. Bond yields rise as prices fall.

Bond prices were an unexpected strong spot for the financial markets last year, reflecting concerns over global economic weakness.

The 10-year note traded at 1.84 per cent Wednesday, down from 1.97 per cent a week earlier. It traded at 1.82 per cent Thursday morning.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 per cent of the loan amount.

The average fee for a 30-year mortgage was 0.6 point, unchanged from last week. The fee for a 15-year mortgage remained at 0.5 point.

The average rate on a five-year adjustable-rate mortgage fell to 2.90 per cent from 2.98 per cent. The fee declined to 0.4 point from 0.5 point.

For a one-year ARM, the average rate slipped to 2.37 per cent from 2.39 per cent. The fee held at 0.4 point.