Mortgage rates continued to inch downward into new record territory this week as worries about the European debt crisis continued to make Treasuries and mortgage-backed securities that fund most home loans look like safe bets to investors.
Borrowers finally seem to be responding to lower rates, with demand for purchase mortgages and refinancing picking up last week.
Rates on 30-year fixed-rate mortgages averaged 4.09 percent with an average 0.7 point for the week ending Sept. 15, a new low in records dating to 1971, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. That’s down from last week’s record low of 4.12 percent, and a 2011 high of 5.05 percent seen in February.
Rates on 15-year fixed-rate mortgages averaged 3.3 percent with an average 0.6 point, down from 3.33 percent last week and a 2011 high of 4.29 percent in February. That’s a new low in records dating to 1991.
For five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.99 percent with an average 0.6 point, up from last week’s record low of 2.96 percent but down from a 2011 high of 3.92 percent in February.
Freddie Mac’s survey showed rates on one-year Treasury-indexed ARMs averaged 2.81 percent this week with an average 0.6 point, down from 2.84 percent last week and a 2011 high of 3.4 percent in February.
Another weekly survey by the Mortgage Bankers Association showed demand for purchase loans was up a seasonally adjusted 7 percent during the week ending Sept. 9, compared to the week before. Demand for purchase loans was still 7.2 percent lower than the same week a year ago.
The survey, which included an adjustment to account for the Sept. 5 Labor Day holiday, also showed requests for refinancings were up 6 percent compared to the week before — the first increase after three consecutive weeks of falling demand. Requests for refinancings were still down 23.5 percent from a year ago.
The average interest rate of mortgages outstanding in the second quarter was 5.28 percent, Freddie Mac chief economist Frank Nothaft said in noting that refinancing into a 30-year fixed mortgage at today’s rates could save homeowners $1,715 a year in interest payments on a $200,000 loan.
Real estate information and analytics provider CoreLogic estimated this week that about 28 million homeowners have mortgages with above-market rates, but many may not be eligible to refinance. About 8 million of those borrowers are "underwater," meaning they owe more than their homes are worth.
The Obama administration has said it’s studying ways the government could use Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) to help more homeowners refinance.
The Congressional Budget Office has estimated that a hypothetical program that generated 2.9 million refinancings might prevent 111,000 defaults at a cost of $600 million to taxpayers and $13 billion to $15 billion to private investors. Boosters of such a plan say much of that money would end up back in the pockets of homeowners who would spend some of it, boosting the economy.
In a Sept. 12 forecast, MBA economists predicted rates on 30-year fixed-rate mortgages will rise to an average of 4.5 percent during the final three months of this year, and continue a gradual rise next year to an average of 5 percent during the fourth quarter of 2012.
