U.S. Mortgage Rates Fall to Record Lows

Mortgage rates around the country fell again this week, sending a popular average rate to a record low -- more good news for the already booming housing industry.

The average of 30-year fixed-rate mortgages tracked by lending giant Freddie Mac dipped to 5.84% from 5.86% last week, the firm said.

The latest rate is the lowest since Freddie Mac began tracking 30-year loan rates in 1971 and a hair below the previous low of 5.85% set Jan. 2.

The average rate for 15-year fixed-rate mortgages, a popular option for refinancing, edged down to a new low of 5.21% from 5.26% last week.

The average for one-year adjustable-rate mortgages hit a record low as well, dropping to 3.81% after three straight weeks at 3.89%, Freddie Mac said.

These averages don’t include add-on fees known as points but are considered reliable indicators of basic borrowing costs.

Mortgage rates tend to track the yield on 10-year Treasury notes because that is used as a benchmark for pricing mortgage-backed bonds that are sold to investors.

But in recent months, mortgage rates have continued to decline even as the 10-year T-note yield has held above its generational low of 3.57% reached Oct. 9. On Thursday the T-note yield was at 3.87%.

The ongoing slide in mortgage rates partly reflects a stronger appetite by many institutional investors for mortgage-backed bonds.

Scott Simon, executive vice president at Pimco Funds in Newport Beach and an expert on mortgage bonds, said the securities have enjoyed massive demand from banks in recent months as they seek to boost their portfolio returns.

He said many insurance firms also have been favoring mortgage securities because the yields are substantially higher than what Treasuries pay.

Heavy demand for mortgage bonds allows loan originators to keep rates lower than they otherwise might be.

That’s more fuel for the housing market. The government reported this week that construction of new homes and apartments posted a 16-year high in January.