Mortgage rates plunged this week in response to virtually nonexistent job growth reported for December, according to surveys conducted by mortgage buyer Freddie Mac and Bankrate.

In Freddie Mac’s weekly survey, the 30-year fixed-rate mortgage averaged 5.66 percent, with an average 0.6 point, for the week ended today, down from 5.87 percent last week. This is the lowest the 30-year fixed has been since the week ending July 11, 2003, when it averaged 5.52 percent.

The average for the 15-year fixed-rate mortgage this week is 4.97 percent, with an average 0.7 point, down from last week’s average of 5.17 percent. This is the lowest the 15-year fixed has been since the week ending July 11, 2003, when it averaged 4.85 percent.

One-year Treasury-indexed adjustable-rate mortgages averaged 3.62 percent this week, with an average 0.7 point, down from 3.76 percent last week. This is the lowest the 1-year ARM has been since the week ending July 18, 2003, when it averaged 3.58 percent.

“Expecting job growth on the order of about 150,000 in December, financial markets were taken aback, to say the least, when those figures came in at only around a thousand new jobs,” said Amy Crews Cutts, Freddie Mac deputy chief economist. “The lackluster employment report had a chilling effect on the market’s recent exuberance, causing mortgage rates to slide to this week’s low levels.

“Meanwhile, the Federal Reserve Board continues to indicate it won’t make any rate changes anytime soon, and it looks like we’re moving from a job-loss recovery to an almost inflation-less recovery, thus insuring that mortgage rates will remain low and affordable.”

In Bankrate.com’s weekly national survey of large lenders, the average 30-year fixed-rate mortgage dropped from 5.87 percent to 5.68 percent. The mortgages in this week’s survey had an average 0.4 discount and origination points. The last time the 30-year fixed-rate mortgage was lower was the week of July 9, 2003 at 5.61 percent.

The 15-year fixed-rate mortgage popular for refinancing declined by a similar amount, falling from 5.19 percent to 5.01 percent. The jumbo 30-year fixed-rate mortgage sank 18 basis points to 5.95 percent and the one-year adjustable-rate mortgage fell 15 basis points to 3.7 percent. A basis point is one one-hundredth of one percentage point.

The large drop in mortgage rates traces to the Jan. 9 release of the December employment report. Despite a drop in the unemployment rate to 5.7 percent, the number of jobs created nationwide was a paltry 1,000 in December. Low interest rates have been sustained by two things – low inflation and a lousy job market – and the lack of job creation was more validation of the latter. Knowing the Federal Reserve is nowhere close to boosting interest rates with prevailing job weakness, investors flocked to long-term government bonds, pushing Treasury yields and mortgage rates lower. Mortgage rates are closely tied to the yields on long-term government bonds.

“A job hunter’s misery is a mortgage hunter’s glory,” said Bankrate senior financial analyst Greg McBride. “Anemic job growth has pushed long-term rates lower, and is keeping the Fed from any thoughts of boosting rates. Lock now before rates rebound on other, more positive, economic indicators.”

The following is a sampling of Bankrate’s average 30-year-mortgage interest rates this week in some U.S. metropolitan areas.

New York – 5.78 percent with 0.01 point

Los Angeles – 5.61 percent with 0.72 point

Chicago – 5.76 percent with 0.13 point

San Francisco – 5.73 percent with 0.36 point

Philadelphia – 5.8 percent with 0.24 point

Detroit – 5.58 percent with 0.44 point

Boston – 5.87 percent with no points

Houston – 5.55 percent with 0.71 point

Dallas – 5.56 percent with 0.7 point

Washington, D.C. – 5.62 percent with 0.68 point

***

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