Mortgage Rates Drop to Lowest Levels of Year Amid Economic Unrest

By Kyle Chezum Updated on 5/27/2011

 

Mortgage rates for 30 year fixed rate loans have reached a new low for the year this week, dropping to an average level of 4.60% across the board.  Rates haven't been this low since late fall of last year, and they've been dropping now for six consecutive weeks, a sign that financing costs may be taking another extended and significant dip.

Rates for 15 year fixed rate loans averaged 3.78% this week, another new low for the year.  During the spring season of 2010, rates on 15 year fixed rate loans were up around 4.21%, a relatively high number compared against current levels.  Other loan types, such as adjustable rate mortgages, are coming in with even lower average rates of 3.48% and 3.11%, depending on loan term length.

There is a strong likelihood that the decrease in financing costs will lead to increased refinancing numbers and possibly higher home purchase numbers as well, but thus far, the spring buying season has fallen mostly flat.  March, the start of what is typically a strong selling season, led to just an 11.5% increase in sales, according to real estate data firm Radar Logic.  March typically brings an increase of at least 16.5% to sales numbers.

Frank Nothaft, chief economist with Freddie Mac, claims the decrease in mortgage rates may simply be a sign that the economy isn't recovering as fast as some experts hoped.  "Fixed mortgage rates eased slightly for the sixth consecutive week amid reports of slower economic activity. The index of leading indicators fell 0.3 percent in April and represented the first monthly decline since June 2010. In addition, the Federal Reserve banks reported less business and manufacturing activity in Philadelphia, Chicago, and Richmond."