By Kevin Chiu
Mortgage rates dropped for the second week in a row as violence breaking out in the Middle–East troubled financial markets, according to Freddie Mac. Rates on fixed rate loans and adjustable mortgages all fell below last weeks levels.
The interest rate on a 30-year fixed rate mortgage averaged 4.95% with 0.6 point for the week down from 5% last week. The rate on a 15-year fixed rate mortgage also saw a drop to 4.22%, a similar .05 decline. A year ago the same mortgage averaged 4.40%.
The 5-year Treasury indexed hybrid adjustable rate mortgage fell to 3.8% for the week from 3.87% a week ago.
As mortgage rates saw a drop, consumers became more motivated to obtain new mortgages to make home purchases and refinances, despite a rise in the consumer price index for January, which indicated that confidence over the U.S. economy remains weak. Mortgage rates are at their lowest levels in more than a month.
“Low mortgage rates and home prices are sustaining affordability in the housing market,” said Freddie Mac chief economist Frank Nothaft. “Existing home sales rose for the third consecutive month in January and were at the strongest pace in eight months, the National Association of Realtors reported.”
The 1-year Treasury indexed ARM, however, rose marginally during the week averaging 3.40%, up from last week when it was at 3.39%. The single figure rise may, however, indicate that rates are still volatile as the U.S. economy struggles with fallout from unrest in Arab countries, especially Libya. Middle–East nations provide 60% of the world’s oil, which could disrupt the U.S. economy and further impact the fragile housing market for years to come.