Mortgage rates took time out this week from their recent climb, the Freddie Mac survey reported, with the 30-year fixed-rate loan falling to an average of 3.93% from 3.98% last week.
Lenders were offering the fixed-rate 15-year loan to solid borrowers at an average of 3.04% early this week, down from 3.1% a week before, Freddie Mac said Thursday.
The 30-year rate averaged 3.35% in early May. It has zoomed toward 4% this month as the market anticipates that the Federal Reserve, seeing improvements in housing and the overall economy, will taper off on its unprecedented stimulus program later this year.
Many rate experts believe a gradual upward trend will continue over the coming year if unemployment drops below 7%, the economy continues to grow and inflation stays tame -- "all likely happenstances," said Keith T. Gumbinger, vice president at rate tracker HSH Associates.
"Where might we be next June?" Gumbinger said. "I'd reckon that we'll be closer to 5% for a conforming 30-year fixed rate than not."
That said, he pointed out that the lowest "natural" 30-year rate -- as in not engineered by the Federal Reserve -- occurred in June 2003, when the rate on the benchmark loan averaged about 5.25%.
"So if we remain below that, rates are still very, very favorable," Gumbinger said.
The Fed said Wednesday that in the short term it would continue its stimulus program, buying $85 billion worth of Treasury notes and mortgage-backed securities each month. The purchases push down long-term borrowing rates, including those for fixed-rate home loans.
However, Fed officials expressed optimism about the prospects for the economy this week, and Chairman Ben S. Bernanke outlined a path for eventually ending the central bank's stimulus efforts.
Freddie Mac's weekly report is probably the most widely watched and certainly the longest running of the many surveys of the mortgage market.
The giant government-controlled housing finance company has asked lenders every week since 1971 about the terms they are offering to well qualified borrowers on 30-year fixed mortgages that meet the requirements for sale to Freddie Mac or to Fannie Mae, the even larger government-sponsored mortgage buyer.
The rates are what's offered to borrowers with high credit scores and down payments of at least 20%, or equivalent equity if they are refinancing. The borrowers would pay less than 1% of the loan amount in lender fees and discount points; paying more upfront can "buy down" the mortgage rate.
The survey does not include additional costs often borne by borrowers, such as fees for appraisals and title insurance.