The Federal Home Loan Mortgage Corporation (FHLMC), or Freddie Mac for short, reported that average mortgage interest rates in the country are approaching record lows this week.
This was probably spurred by a set of weaker than expected U.S. economic data, started by the release of the bleak non-farm payrolls figure for March followed by weak retail sales and durable goods orders figures, which led lenders to speculate that the Federal Reserve will keep monetary policy easy until the end of the year.
According to Freddie Mac’s weekly survey, average mortgage rates slid for the fourth consecutive week, with the typical 30-year fixed rate at 3.4% this week from 3.41% last week, lower than the 3.88% average rate during the same week last year.
Similarly, the average 15-year fixed rate also declined from 2.64% the previous week to 2.61% this week, down from the 3.12% average rate during the same week in 2012. This is a new record low for the 15-year fixed interest rate since the previous low recorded was at 2.63% in November.
For the 5/1 ARM (adjustable rate mortgage) loans, the average rate dropped from 2.6% last week to 2.58% this week. The one-year ARM loans with the 10-year Treasury bond as benchmark saw the average rate lower at 2.62% this week. These ARM home loans feature a fixed rate period followed by an variable rate period wherein the applicable interest rate is adjusted to reflect current market rates.
The low interest rate environment is boosting demand in the retail housing market as existing home sales picked up at an average pace of 4.94 million for the first quarter of 2013. In addition, new home sales reached 424,000 during the same period, its fastest pace of increase since the third quarter of 2008.
Freddie Mac Chief Economist Frank Nothaft noted that low interest rates and corresponding pick up in home sales are helping provide support for house prices.