Fixed mortgage costs sink to record low
(MoneyWatch) After two consecutive weeks of declines, fixed mortgage rates have reached new lows.
According to Freddie Mac's latest Primary Mortgage Market survey, both 15- and 30-year fixed rate mortgage (FRM) are falling. For the week ending May 17, the 30-year FRM averaged 3.79 percent, down from last week's average of 3.83 percent. Last year at this time, the 30-year FRM averaged 4.61 percent.
The 15-year FRM hovered around 3.04 percent for the week. That's down slightly from last week's average of 3.05 percent and significantly lower than this time last year, when the rate averaged 3.8 percent.
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The average interest rate on a five-year Treasury-indexed hybrid adjustable rate mortgage (ARM) was 2.83 percent this week, up slightly from last week's average of 2.81 percent. One year ago, the five-year ARM averaged 3.48 percent. One-year Treasury-indexed ARM rates also rose slightly, up to 2.78 percent from last week's average of 2.73 percent. At this time last year, the one-year ARM averaged 3.15 percent.
Concerns about Europe and a slowing economic recovery contributed to the low rates.
"The European debt crisis overshadowed improving economic indicators for the U.S. and allowed Treasury bond yields and fixed mortgage rates to ease for another week," said Freddie Mac chief economist Frank Nothaft in a statement. "For instance, industrial production rose 1.1 percent in April -- the largest gain since December 2010 -- and consumer sentiment in May rose to its highest reading since January 2008, according to the University of Michigan."
"There was also good news in the home construction industry," he added. "Housing starts rose to an annualized rate of 717,000 homes in April, well above the market consensus forecast, and construction on one-family homes increased to its strongest pace in three months."
The labor market also appears to be slowly healing, if fitfully. Weekly U.S. jobless claims were unchanged at 370,000, while the U.K. reported a decrease in its unemployment rate, which cheered markets.
