Freddie Mac report: 30-year mortgage rates are in free-fall

1/9/2009

WASHINGTON - Rates on 30-year mortgages fell to a record level for a fourth straight week, dropping to the lowest mark since Freddie Mac started tracking nearly 38 years ago.

Rates have been falling since late November, when the Federal Reserve announced a plan to spend up to $500 billion to buy up mortgage-backed securities in efforts to buttress the distressed U.S. housing market.

Freddie Mac reported yesterday that average rates on 30-year fixed mortgages dropped to 5.01 percent this week, down from the previous record of 5.1 percent set last week. It was the 10th straight weekly drop, and nearly a full point below the rate of 5.87 percent at the same time last year.

Rates are at their lowest since the company started its survey in April, 1971. They have declined nearly 1.5 percentage points since October.

On a $200,000 loan, that means a savings of more than $184 in monthly payments, ac-cording to Frank Nothaft, the mortgage finance company's chief economist.

JPMorgan Chase & Co. is advertising 30-year mortgages as low as 4.75 percent on its Web site, Wells Fargo & Co. has an offer for 4.875 percent, and Bank of America Corp. has rates at 5 percent. The offers are for borrowers with excellent credit who put 20 percent down.

The falling rates have led to an increase in mortgage applications until last week. The Mortgage Bankers Association reported Wednesday that its weekly mortgage application index fell 8.2 percent for the week ended Jan. 2 compared to the previous week, although the holiday could be a factor.

While the lower mortgage rates help mortgage holders with good credit and plenty of home equity who want to refinance, they do little to help those in foreclosure.

In scenic Clearwater Beach, Fla., Valerie Saunders has seen a "dramatic upswing" in interest from people who want to refinance at her mortgage company, R.E. Financial Services Inc.

Ms. Saunders said she closed two transactions for 30-year-fixed rate mortgages Wednesday, with a rate of 5 percent on one and 4.875 on the other.

"People should be jumping on it and taking advantage of these rates," Ms. Saunders said. "It's only going to have a positive effect."

The average rate on a 15-year fixed-rate mortgage dropped to 4.62 percent, the lowest point since June, 2003. That rate was 4.83 percent last week, Freddie Mac said.

Average rates on five-year, adjustable-rate mortgages fell to 5.49 percent, compared with 5.57 percent last week. Rates on one-year, adjustable-rate mortgages rose to 4.95 percent, up from 4.85 percent last week.

Freddie Mac and sibling company Fannie Mae own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt. The government seized control of the companies in September.

The rates do not include add-on fees known as points. The nationwide fee for 30-year mortgages averaged 0.6 point for this week. Fees for 15-year mortgages and five-year adjustable rate mortgages averaged 0.7 point, compared with 0.5 point for one-year adjustable-rate mortgages.

Jill Pfeiffer, a mortgage broker in San Diego, this week obtained a 4.875 percent rate on a 30-year fixed loan for a homebuyer with a credit score above 750, she said in an interview.

"It's the lowest I've ever locked in on a 30-year fixed" since she began her business in 1996, she said.

Mortgage rates are dropping as home prices in 20 major U.S. cities declined 18 percent in the year through October, the fastest rate on record, as tighter lending standards curbed sales and foreclosure sales pushed down values.

Sales of single-family homes declined 7.6 percent in November from the prior month, the most in two decades, according to the Chicago-based National Association of Realtors. Resale prices fell 13 percent, the most since the 1930s.

Lower mortgage rates may not encourage some buyers because U.S. apartment rents are falling.

Apartment rents fell in the fourth quarter from the third as the national vacancy rate climbed to a four-year high of 6.6 percent, Reis Inc. said yesterday.

Asking rents fell 0.1 percent from the previous quarter, to $1,052 on average, their first quarter-to-quarter decline in almost six years. Effective rents, what tenants actually paid, fell to an average $996 last quarter, down 0.4 percent from the prior quarter.

"Even if rates go low enough, if you got married, you're 28 years old with no kids - the typical first-time buyer - you'll wait a year and continue to rent because there are good deals out there," said Paul Miller, a mortgage industry analyst with Friedman Billings Ramsey & Co. in Arlington, Va.