Mortgage rates hit 20-month low as 30-year loans fall to 3.73%

Worries about economic troubles in Europe and Asia have sent mortgage rates plunging to a 20-month low, with Freddie Mac saying the average rate for a 30-year conventional loan fell to 3.73% early this week from 3.87% a week earlier.

The average rate for 15-year fixed home loans, popular with refinancers seeking to retire their housing debt, averaged 3.05%, down from 3.15% last week.

The starting rates on adjustable mortgages were slightly lower as well, Freddie Mac reported Thursday.

The rates, a boon to consumers seeking to buy homes or refinance mortgages, have arrived amid positive indicators on the domestic economy, including declining requests for unemployment benefits, rising consumer confidence and increases in wages.

That strength contrasts with a European economy so fragile that the European Central Bank is expected later this month to launch a bond-buying program similar to the stimulus the Federal Reserve employed here as an extraordinary reaction to the Great Recession.

With once-booming emerging economies from Brazil to China now slowing as well, spooked investors around the world are seeking the haven of ultra-safe government bonds.

The effective annual interest rate on 10-year securities issued by Germany and Japan has fallen well below 1%, and the yield on 10-year U.S. Treasury notes dropped below 2% last week for the first time in three months.

The yield on securities issued by Freddie Mac and Fannie Mae, which package about 60% of all U.S. mortgages to back the bonds, tend to follow the trend set by Treasuries.

With bond investors accepting lower yields on these securities and on the Ginnie Mae bonds backed by Federal Housing Administration and Veterans Administration home loans, mortgage bankers can lower the rates charged to consumers.

“As has been the case, global uncertainty continues to be the friend of the American homebuyer and homeowner,” said Keith Gumbinger, vice president of HSH.com, a research firm that also tracks mortgage rates.

Freddie Mac asks lenders early each week about the terms they are offering on popular types of home loans. It said this week’s 3.73% average for the 30-year fixed mortgage was the lowest since May 23, 2013, when the average was 3.59%.

The rates in this week’s survey assumed borrowers paid about half of 1% of the loan amount in upfront lender fees and discount points.

Payments for such services as appraisals and title insurance are not included.

The survey provides a consistent gauge of mortgage trends, but actual rates adjust constantly and are influenced by many factors. In addition to borrowers’ credit histories and debt loads, the factors include whether borrowers opt for zero-cost loans at higher rates or pay extra to lenders initially to lower the rates.

Follow @ScottReckard for news of banks and home loans