Freddie Mac: Mortgage rates at six-month low; 30-year averaging 4.2%

Mortgage rates edged down a hair this week, hovering at the lowest level in six months, with Freddie Mac reporting that lenders were offering 30-year fixed home loans at an average of 4.2% compared to 4.21% a week earlier.

The average rate for a 15-year fixed loan dropped from 3.32% to 3.29%, according to Thursday’s Freddie Mac report.

The average initial rate fell from 3.05% to 3.01% on 30-year loans that become variable after five years at a fixed rate.

The latest report came amid a flurry of stories about an unexpected rally in bond markets. (When bond prices rise, interest rates go down.)

The yield on the 10-year Treasury note, a benchmark for fixed mortgages, opened this year at 3% and dipped as low as 2.5% in trading Thursday.

As the Los Angeles Times reported last week, some borrowers have been able recently to get 30-year fixed loans for just under 4%.

“These lower-than-expected rates are welcome news with the spring home-buying season under way,” Freddie Mac chief economist Frank Nothaft said as the latest report was issued.

The decline, Nothaft said, “may even provide those who haven’t already refinanced possibly a reason to take another look.”

Freddie Mac asks lenders early each week about the terms they are offering to solid borrowers with 20% down payments or 20% equity in their homes if they are refinancing.

Freddie Mac’s survey assumes that borrowers have excellent credit and pay less than 1% of the loan amount in upfront fees and discount points to their lenders. It does not include the cost of such third-party services as appraisals and title insurance.

Actual mortgage rates fluctuate day to day. Borrowers can lower their rate by paying additional discount points when they obtain home loans, or can accept a higher rate in exchange for loans with zero cost upfront.