Mortgage rates sank to or near all-time lows this week as turmoil in financial markets had investors moving money into the relative safety of bonds and mortgage-backed securities that fund most home loans.
Rates on 30-year fixed-rate mortgage hit a low for the year, averaging 4.32 percent with an average 0.7 point for the week ending Aug. 11, Freddie Mac said in releasing the results of its latest Primary Mortgage Market survey.
That’s down from 4.39 percent last week and a 2011 high of 5.05 percent in February, and not far off an all-time low in records dating to 1971 of 4.17 percent during the week ending Nov. 11, 2010.
Rates on 15-year fixed-rate mortgages, 5-year adjustable-rate mortgage (ARM) loans 1-year ARMs all hit new all-time lows this week.
For 15-year fixed-rate mortgages, rates averaged 3.50 percent with an average 0.7 point, down from 3.54 percent last week the 2011 high of 4.29 percent in February. Rates on 15-year fixed-rate loans have never been lower in Freddie Mac surveys dating to 1991.
Rates on 5-year Treasury-indexed hybrid ARMs also hit a record low in records dating to 2005, averaging 3.13 percent with an average 0.5 point. That’s down from 3.18 percent last week and a 2011 high of 3.92 percent in February.
The 1-year Treasury-indexed ARM averaged a record low 2.89 percent with an average 0.5 point, down from 3.02 percent last week and a 2011 high of 3.40 percent in February.
"Renewed market concerns about the European debt markets led investors to shift funds into U.S. Treasuries, pushing long-term yields lower," said Freddie Mac chief economist Frank Nothaft in a statement.
Nothaft noted that the Federal Reserve’s Open Market Committee announced this week that economic conditions are likely to warrant "exceptionally low levels" for the federal funds rate at least through mid-2013, which also helped mortgage rates ease lower.
Looking back a week, a separate survey by the Mortgage Bankers Association showed homeowners rushing to refinance to take advantage of lower rates, but that demand for purchase loans was up only slightly from a year ago.
The MBA survey showed applications for refinancings were up 30.4 percent during the week ending Aug. 5 compared to the week before, but demand for purchase loans was down 1.2 percent on a seasonally adjusted basis. Looking back a year, demand for purchase loans was up 4.9 percnet.
"Over the past month, refinance application volume has increased by 63 percent," said Mike Fratantoni, the MBA’s chief economist, in a statement. Loan ceilings for Fannie Mae, Freddie Mac and FHA are scheduled to drop on Oct. 1, and refinance applications for jumbo loans were up by almost 75 percent from the previous week.
In a July 20 forecast, MBA economists said they expect rates on 30-year fixed-rate mortgages will rise to an average of 5 percent during the final three months of the year, and continue on a steady upward trajectory to reach an average of 5.6 percent during the fourth quarter of 2012.