Mortgage rates fell as the nation focused on negotiations in Washington, D.C. over the Congressional budget debacle last week. The rate on the little used 15-year fixed mortgage hit the lowest level in more than 21 years to drive a modest upturn in mortgage loan activity, according to the Mortgage Bankers Association.
The average rate on a fully executed 15-year fixed rate loan dropped to 3.52% from 3.67% with 1.02 points on an 80% loan-to-value mortgage, according to the bankers’ survey which accounts for about half of all home mortgage applications in the U.S.
The average rate on a 30-year fixed rate loan declined to 4.45% from 4.57% for the week with 0.78 point. The drop in mortgage rates, however, last week is expected to be offset by a rise in rates this week with U.S. Mortgage Treasury bonds hitting their lowest level since last November on Tuesday.
The rate on the benchmark 10-year Treasury dropped to as low a yield as 2.64% during mid-day trading Tuesday. Treasury rates are closely followed by financial market traders since they usually indicate changes in the direction of interest rates.
A significant increase in interest rates could jeopardize the U.S. housing market, which is already struggling to gain any sort of footing into a recovery. Home sales, however, have seen an increase in many areas of the nation with much lower prices and a large inventory of discount priced properties to chose from that have been foreclosed as home values continue to slide in most regions.
“Treasury rates plummeted more than 20 basis points last week as all eyes were focused on the debt ceiling negotiations in Washington and economic data depicted much slower than anticipated economic growth,” said MBA Vice President of Research and Economics Michael Fratantoni.
The market composite index, a combination of new home applications and refinance applications rose 7.1% on a seasonally adjusted basis from a week earlier. Refinances increased 7.8% as homeowners came out in larger numbers as a result of lower interest rates. The purchase index rose 5.1% from the previous week.