Fixed mortgage rates fell early this week, with Freddie Mac reporting the average for 30-year loans dropped to 4.32% from 4.37% last week.
The McLean, Va., housing finance company said lenders were offering 15-year fixed home loans, a popular option for refinancers, at an average of 3.32%, down from 3.38% last week. The start rate fell from 3.09% to 3.02% on so-called hybrid loans that become variable after five years at a fixed rate.
The rates seemed likely to move higher, though, following remarks by Federal Reserve Chairwoman Janet L. Yellen at midday Wednesday, about the time Freddie wrapped up its weekly survey of the terms lenders are offering to low-risk borrowers.
At her first news conference as head of the Fed, Yellen suggested short-term interest rates, which the central bank has kept near zero since December 2008, could begin rising as early as spring 2015.
Investors, still skittish about the Fed’s gradual pullback on a bond-buying stimulus program, reacted late Wednesday by sending stocks lower and the yield on the 10-year Treasury note, a proxy for fixed mortgages and other long-term borrowings, up sharply.
“If this holds, interest rates may begin to trend higher going into next week,” Frank Nothaft, Freddie Mac’s chief economist, said in announcing the mortgage rate survey Thursday morning.
If the sharp reaction to Yellen’s remarks showed investors are still edgy, another indicator appeared to show that the attitude of consumers toward housing debt is returning to historical norms.
A new study from the TransUnion credit bureau found that as of September U.S. borrowers had begun regarding it as more important to pay their mortgages than their credit-card bills.
This reverses a trend dating to September 2008, when the mortgage crisis drove consumer preferences toward paying credit cards first.
As unemployment rose and home prices cratered, many Americans were forced to make difficult choices, said TransUnion Vice President of Research Ezra Becker, the study’s author.
“Many chose to value their credit card relationships above their mortgages,” Becker said.
Freddie Mac’s survey, a widely followed gauge of mortgage rates, dates to 1971. It asks lenders about the terms they are offering to solid borrowers who pay less than 1% of the loan amount in upfront fees and discount points to lenders.
Third-party closing costs typically borne by borrowers, such as fees for appraisals and title insurance, are not included. Borrowers can obtain lower rates by paying additional points or get zero-cost loans by accepting higher rates.
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