In response to both negative economic data and the Federal Reserve’s latest stimulus plan, long-term mortgage interest rates again fell to record all-time lows this week, according to mortgage finance company Freddie Mac.
The average rate on a 30-year fixed rate mortgage dropped to a new low of 3.36 percent, excluding points, during the week ended Oct. 4, down from 3.40 percent the week before. Last year at this time, the average rate was 3.94 percent.
Fifteen-year fixed rate mortgages also plunged to a new record this week, falling to 2.69 percent, down from 2.73 percent last week, and 3.26 percent one year ago.
“Fixed mortgage rates fell again this week to all-time record lows due to the mortgage securities purchases by the Federal Reserve and indicators of a weakening economy,” said Frank Nothaft, Freddie Mac vice president and chief economist in a press release. “The final estimate of growth in Gross Domestic Product was revised down to 1.3 percent in the second quarter, representing the slowest growth in a year. In addition, personal incomes rose only 0.1 percent in August, while July’s increase was revised downward. And finally, pending home sales in August fell 2.6 percent, well below the market consensus forecast of a slight increase.”
And mortgage refinance requests have skyrocketed in the past week as rates have tumbled. The Mortgage Bankers Association reported a 20 percent increase in its index of refinance loan application volume. The index reading has not been this high since April 2009. Refinance requests now make up 83 percent of all home loan applications.
“Refinance application volume jumped to the highest level in more than three years last week as each of the five mortgage rates in MBA’s survey dropped to new record lows in the survey,” said Mike Fratantoni, MBA’s Vice President of Research and Economics in a statement, citing the same factors as Freddie Mac’s Nothaft did. “Financial markets continue to adjust to QE3, as the ongoing presence of the Federal Reserve as a significant buyer of mortgage-backed securities applies downward pressure on rates.”