30-Year Fixed-Rate Mortgages Below 4% for the First Time

The average rate for the conventional 30-year fixed-rate mortgage dropped below 4% for the first time in history, while the 15-year fixed-rate mortgage fell to its lowest level on record for the sixth consecutive week, according to Freddie Mac's Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage averaged 3.94%, with an average 0.8 point for the week ending Oct. 6, down from last week when it averaged 4.01%. Last year at this time, the product averaged 4.27%. 

The 15-year fixed-rate mortgage averaged 3.26%, with an average 0.8 point - down from last week, when it averaged 3.28%. A year ago at this time, the product averaged 3.72%. 

Adjustable-rate mortgages (ADJUSTABLE RATE MORTGAGEs) showed mixed results. The five-year Treasury-indexed hybrid ADJUSTABLE RATE MORTGAGE averaged 2.96% this week, with an average 0.6 point - down from last week, when it averaged 3.02%. A year ago, the product averaged 3.47%. However, the one-year Treasury-indexed ADJUSTABLE RATE MORTGAGE averaged 2.95% this week, with an average 0.5 point, up from last week's average of 2.83%. At this time last year, the product averaged 3.4%.  

Frank Nothaft, vice president and chief economist at Freddie Mac, attributed the declining rates to a combination of concerns over a new global recession and the newly reported declines in pending home sales and personal income.

The average interest rate on the popular 30-year fixed-rate mortgage continued its downward drift, once again setting new record lows, according to Weekly Mortgage Rate Radar. The average rate for conforming 30-year fixed-rate mortgages fell by 2 basis points (0.02 percent) from the previous week to 4.11 percent. Conforming 5/1 hybrid ADJUSTABLE RATE MORTGAGE rates increased, but only by a single basis point; 5/1 ADJUSTABLE RATE MORTGAGE rates closed the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.02 percent.

"After a Federal Reserve-induced dip a week ago, mortgage rates have leveled off somewhat, but we remain at or virtually at record lows," said Keith Gumbinger.

With the Fed's Operation Twist program just getting underway this week, Gumbinger noted, "We will start to see more effects in the mortgage market. How both the economy and investors react to the Fed's program as it comes more fully into play will determine how much lower mortgage rates will go."

Conforming 30-year fixed-rate mortgage

  •     Average rate: 4.11 percent
  •     Average points: 0.27

Conforming 5/1 ADJUSTABLE RATE MORTGAGE

  •     Average rate: 3.02 percent
  •     Average points: 0.22

Average mortgage rates and points for conforming residential mortgages for the previous week ending September 27 were, according to HSH.com:

Conforming 30-year fixed-rate mortgage

  •     Average rate: 4.13 percent
  •     Average points: 0.25

Conforming 5/1 ADJUSTABLE RATE MORTGAGE

  •     Average rate: 3.01 percent
  •     Average points: 0.21

Methodology

The Weekly Mortgage Rate Radar reports the average rates and points offered on conforming 30-year fixed-rate mortgages and conforming 5/1 ADJUSTABLE RATE MORTGAGEs. The weekly mortgage rate survey covers a large sample of mortgage lenders and is conducted over a Wednesday-to-Tuesday cycle, with data released every Wednesday.

Our survey helps consumers find the best rates on home loans in changing market conditions. Unlike mortgage rate surveys that report average rates only, the Weekly Mortgage Rate Radar's inclusion of both average rates and average points provides a more accurate view of mortgage terms currently offered by lenders.

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinances applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 4 basis points to 4.11% since last week while the purchase application volume declined 0.8% and the refinance application volume declined 5.2% over the same period.

With rates at or near generational lows (including the 10-year T-Bill) and the FOMC members becoming more dovish by the day, it will be interesting to see where rates will go once clear details of QE3, likely to be focused more on long term rates, are revealed.