Average mortgage rates in the United States inched down, declining for the fifth straight week, Freddie Mac - the government-backed mortgage giant - announced Thursday.
The latest mortgage survey revealed that average 30-year fixed rates went down to 4.12 percent from last week's 4.14 percent. The average 15-year fixed rate also decreased to 3.21 percent from last week's 3.25 percent.
The five-year adjustable mortgage rate averaged 2.96 percent, hardly reflecting any changes. However, the average treasury-indexed adjustable mortgage rate was down 2.41 percent as compared with last week's 2.43 percent.
Lower mortgage rates are good for the spring housing market as home buying activity has relatively been slow. Tight inventory and high demand have fueled home prices and dampened affordability.
"Fixed mortgage rates eased a bit for the fifth consecutive week as reports that existing home sales are up 1.3 percent but not as much as expected. However, new home sales [PDF] rose 6.4 percent in April to a seasonally adjusted annual rate of 433,000, which followed an upward revision of 11,000 units for the prior two months," said Frank Nothaft, vice president and chief economist at Freddie Mac, in an official statement.
"Also, as the spring home buying season continues, we see stronger consumer confidence as house prices remain on the rise. The Conference Board reported that confidence among consumers rose in May after dipping in April. Meanwhile, the S&P/Case-Shiller® 20-city composite index [PDF] rose 0.9 percent in March, above the consensus forecast," he added.
However, the record low rates haven't had much affect on the buying activity. Recent figures revealed by the Mortgage Banking Association show that mortgage applications declined 1.2 percent for the week ended May 23.
However, experts have been optimistic about the falling rates.
"The more rates drop, the more houses people can buy," said Charlie Murphy, president and CEO of IconBuilding Group, to the Chicago Tribune in an earlier interview.
"It's less about the gross sale amount and more about what the payments are to maintain the loan."
Some suggest that the rates will keep declining as a large number of outside investors enter the mortgage bond market. Inferring to the Federal Reserve's bond-buying scheme cut backs, Dan Green writes in his blog:
"Well, today, the Fed's QE3 purchases amount have been halved to $20 billion monthly. Yet, mortgage rates are dropping. This is because outside investors are entering the mortgage bond market faster than the Fed can leave it."
"Rates may continue to drop as QE3 continues it taper. You may not want to gamble on that, though. At today's mortgage rates, 1-point rise in mortgage rates will reduce your maximum home purchase price by 12%," Green warns.
