Real Estate Mortgage Rates Lowest in Year as Refinances Surge

Real estate mortgage rates dropped to the lowest level in a year to below 5%, according to Freddie Mac’s mortgage market survey. A 30-year conventional rate home mortgage was just seven-one-hundredths of a point higher than a year ago driving a surge in refinances.

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Refinances increased to 57.7% of applications, marking more than an 8% increase over the previous week. Lower real estate values have prohibited many home owners from refinancing since they lack equity in their homes.

But a special government program offered by the nation’s two mortgage giants, Freddie Mac and Fannie Mae is allowing many homeowners who would not otherwise be able to refinance because of a lack of equity in their homes to do so.

The highly watched 30-year conventional rate mortgage dropped to 4.93% on average nationally from last week. The 30-year mortgage has not been lower since December 2009 when the rate was 4.81%, an all-time low for a home loan. The 15-year rate average of 4.3% was down from 4.52% a year ago.

Adjustable rate mortgages averaged 3.95% this week, only a slight two-hundredths of a drop below last week. Variable rate mortgages allow home buyers to purchase a higher priced house, but the real estate crash has resulted in fewer mortgage borrowers taking advantage of the loans.

The disparity between the loan products has been driven by a lack of consumer confidence in home lending, mortgage fraud, Wall Street and banking fraud and doubts about the surety of loans and banking institutions, which are suffering from a lack of confidence from consumers. The five year ARM hasn’t been at a lower level since Freddie Mac started tracking mortgages in 2005.

“Interest rates on fixed rate mortgages declined for the fifth straight week,” said Freddie Mac chief economist Frank Nothaft. Growing evidence suggests that at least the start of a housing recovery is taking place in many areas of the country as home buyers turned out to take advantage of the federal government tax credits, despite falling home values in the over-whelming majority of markets.

More than two-thirds of those surveyed said that the housing market would be driven south as a result of the federal government’s expiration of the home buyers tax credit.

A slowdown in mortgage applications is developing, especially in the southern and north-eastern regions of the country. Near record low mortgage rates, spurred an increase in refinancing for homeowners who are able to take advantage of the lower rates, according to the Mortgage Bankers Association.

“The recent plunge in rates on US Treasury securities due to a flight to quality as investors worldwide sought shelter from the Greek debt crisis benefitted US mortgage borrowers last week,” said Michael Fratantoni, the mortgage bankers head of economics.