The average fixed mortgage rates in the U.S. fell to a new low this week, driving down borrowing costs. This week's rates are the lowest since January 2014, according to Freddie Mac's latest mortgage survey.
The 30-year average fixed mortgage rates went down 0.6 points this week to 4.21 percent from last week's 4.29 percent. The fixed 15-year mortgage rates were also down to 3.32 percent, 0.6 points down from last week's 3.38 percent.
The five-year adjustable rate mortgage averaged 3.05 percent, remaining largely unchanged from last week's figures. However, the average treasury-indexed adjustable rate mortgage was down 0.4 points to 2.43 percent.
According to Freddie Mac, rates went down on low yields of treasury bonds and a slow economic recovery. The spring buying market also got off to a sluggish start.
"Mortgage rates continued moving down following the decline in 10-year Treasury yields after a dismal report on real GDP growth in the first quarter. Meanwhile, the economy added 288,000 jobs in April, the largest since January 2012, and followed an upward revision of 36,000 jobs for the prior two months. Also, the unemployment rate fell to 6.3 percent," Frank Nothaft, vice president and chief economist, Freddie Mac, said in a press release.
This is the second consecutive week of mortgage rate declines. The figures had risen to a full percentage since last year. However, rising property prices have affected home affordability thus driving down the rates. The cold winter chill had also limited buyer interest inducing little activity in the market.
Janet Yellen, Federal Reserve chair said that the economy was still soft and in need of stimulus.
"Readings on housing activity, a sector that has been recovering since 2011, have remained disappointing so far this year and will bear watching. The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery," Yellen said in a testimony to the Joint Economic Committee of Congress Thursday, reports Bloomberg.
While mortgage rates declined, application increased, indicating a stronger spring market. According to recent data from the Mortgage Banking Association, the volume of home loan applications increased 5.3 percent, for the first time in the past five years. Also, more people applied for a mortgage to buy a home than to refinance one.
"It's official: We are in a majority purchase market for the first time since 2009," The Washington Post reported Mike Fratantoni, MBA's chief economist saying in a statement.
"A sizeable increase in purchase applications last week likely reflected the impact of somewhat lower mortgage rates as well as continued growth in the job market, as confirmed by Friday's employment report from the [Bureau of Labor Statistics]. Despite the strong increase in the purchase market last week, volume continues to run 16 percent behind last year's pace."
Analysts expect the rates to keep steady over the next week.
"If a surprisingly strong jobs report isn't enough to push rates higher-and rates actually fall-then I'm not sure what will," Greg McBride, chief financial analyst with Bankrate.com told Realtor.com.
