Mortgage rates tumbled to their lowest level of 2014 on weak economic news, with Freddie Mac's survey showing the average rate for a 30-year fixed home loan was 4.21% early this week, down from4.29% a week ago.
The cost of financing for homeowners looking to pay off housing debts faster fell as well, Freddie Mac said. Lenders were offering 15-year fixed loans to solid borrowers at an average of 3.32%, down from last week’s 3.38%.
Janet Yellen, the head of the Federal Reserve, sounded upbeat about the economy this week as she looked ahead, although she noted that housing markets remained weak.
But the rear-view mirror showed a different and troubling picture. The government said last week that the economy barely grew at all in the first quarter, attributing some of the slowdown to horrendous winter weather.
Worried investors sought the safety of U.S. Treasury bonds, which drove down their yields, or effective interest rates. The yield on the 10-year note, a benchmark for home lending, has fallen from above 2.7% on April 22 to about 2.6% this week.
“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," Freddie Mac chief economist Frank Nothaft said in releasing the latest rate survey.
Though mortgage rates change daily, Freddie Mac's report reflects a survey of lenders conducted each Monday through midday Wednesday. The lenders are asked about the terms they are offering to borrowers with good credit histories, sufficient income to make payments and 20% down payments.
The borrowers would pay less than 1% of the loan amount in upfront fees and discount points to lenders -- 0.6% in the survey released Thursday. The survey also excludes additional costs often paid by borrowers, including fees for appraisals and title insurance.
Borrowers often opt for zero-cost mortgages by accepting a higher rate, or pay additional discount points upfront to reduce their rate.Copyright © 2015, Los Angeles Times