By Mike Colpitts
Mortgage interest rates fell for the fourth straight week to the lowest level of the year as an over supply of homes on the market pressure lenders’ to keep rates low to draw more buyers back into the market.
The rate on a 30-year fixed rate mortgage had a fall of 0.08 for the week to 4.63% with an average 0.7 point, according to Freddie Mac. A year ago the same loan was at 4.93%. The 15-year fixed rate loan also fell for the week to 3.82% from an average of 3.89% last week.
“Mortgage rates continued to decline this week following a mixed employment report,” said Freddie Mac chief economist Frank Nothaft. “The economy added a healthy number of 244,000 workers in April, the most in 11 months, and the figures for March and February were revised up by 56,000 more jobs.”
However, the unemployment rate across the U.S. rose to an average of 9.0% as more corporations fall on hard times, laying off workers in light of weak economic conditions, triggering an expected rise in additional mortgage defaults. The rate hasn’t been this high since last January.
The pent up supply of foreclosures and short sales, in which banks allow homeowners to pay-off a mortgage at less than what is owed on a loan is troubling the marketplace, despite 70% of all foreclosures in the nation being in 10 states.
Distress properties are selling for an average of 20% less than the rest of the housing inventory, according to the National Association of Realtors and accounted for 39% of existing home sales during the first quarter of the year.
The 5-year Treasury indexed hybrid adjustable rate mortgage averaged 3.41% for the week, down from its 3.47% average rate last week. The 1-year ARM also saw a fall for the week to 3.11%, a 0.03 drop from a week ago.