By Ryan Jackson
Key mortgage rates fell for the fourth straight week as consumer interest to take out mortgages slowed because of the holiday weekend. The average rate on a fully executed 30-year fixed rate mortgage dropped to 3.91%, the lowest in the history of the Mortgage Bankers survey.
Economists attribute the drop in rates to financial and political jitters in Europe, driving U.S. Treasury bonds to near record lows. Lower yields paid to investors on Treasuries usually translate to lower mortgage rates for borrowers.
The average contracted rate on a conventional 15-year fixed rate loan fell to 3.23%, also the lowest in the history of the bankers’ survey, down from 3.26% a week earlier. The 5-year ARM decreased to 2.77%, the lowest in the history of the survey for the week ending last Friday on 80% loan-to-value mortgages.
Government backed FHA loans were even lower. The 30-year fixed mortgage dropped to 3.70%, down from 3.73% a week earlier. However, Federal Housing Administration mortgages sometimes require upfront premiums to be paid by borrowers seeking the lowest rate possible with minimum down payments.
Despite the record low rates being offered, applications fell for the first time in three weeks as the annual Memorial Day weekend approached taking consumers minds off of business matters. The Mortgage Bankers market composite index, covering both refinances and new home purchases fell by 1.3% on a seasonally adjusted basis from the previous week.
Refinances took the heaviest hit, declining 1.5% from the prior week. Refinancing still makes up the majority of applications for mortgages as homeowners work to reduce their debt burdens and pay off other bills.