Tax credits for homebuyers could be extended to September 30 by Congress. Mortgage rates dropped to levels that haven't been seen since 1971.
AP Photo/Phil Coale
Mortgage rates dropped in the past week, with 30-year fixed-rate loans tumbling to their lowest level in 39 years, according to a survey released on Thursday by Freddie Mac, the second-largest U.S. mortgage finance company.
Interest rates on 15-year fixed-rate and hybrid adjustable-rate mortgages dropped to fresh lows as well. While low rates and high affordability helped the housing market gain ground over the past year, the sector has struggled since popular home buyer tax credits expired on April 30.
Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.69 percent for the week ended June 24, the lowest since Freddie Mac started the survey in April 1971. The latest rate is down from the previous week's 4.75 percent and the year-ago level of 5.42 percent, according to the survey.
Freddie Mac (FRE.P)(FRE.N) said the 15-year fixed-rate mortgage averaged 4.13 percent, down from 4.20 percent last week and the lowest since Freddie Mac started tracking the mortgage type in September 1991.
Eligibility for home buyer tax credits required buyers to sign purchase contracts by April 30, with sales required to close by June 30. There is currently a push in Congress to extend the contract settlement to September 30.
Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.
LOW RATES, MUTED DEMAND
Leif Thomsen, CEO of Mortgage Master in Walpole, Massachusetts, said he has seen a noticeable drop in demand for home loans in recent weeks.
"We will probably see a slow-to-OK summer for home purchase loan demand," he said. "The direction of interest rates will dictate overall volume."
The Mortgage Bankers Association said on Wednesday that applications fell from a six-month peak last week as low interest rates failed to foster demand for refinancing or home purchase loans.
One-year adjustable-rate mortgages (ARMs) were 3.77 percent, down from 3.82 percent last week and the lowest since the week ended May 6, 2004.
The rate on the 5/1 ARM, set at a fixed rate for five years and adjustable each following year, was 3.84 percent, down from 3.89 percent last week, and the lowest since Freddie Mac started tracking the mortgage type in January 2005.
A year ago, 15-year mortgages averaged 4.87 percent, the one-year ARM was 4.93 percent and the 5/1 ARM was 4.99 percent.
(Editing by Padraic Cassidy)