Mortgage Rates Drop to Three-Month Low

Interest rates on a long-term mortgage fell for the third consecutive week and dropped to a three-month low, but eager buyers may have trouble taking advantage of these low rates if the government shutdown drags on.

The average rate on a 30-year fixed rate mortgage (FRM) sank to 4.22 percent, excluding fees, during the week ended October 3, according to Freddie Mac, down from 4.32 percent the week before and down from 3.36 percent last year at this time. The 30-year rate has not been this low since the week of June 20.

The 15-year FRM rate dropped to 3.29 percent from 3.37 percent last week. One year ago the rate was 2.69 percent. The average rate on a one-year adjustable rate mortgage was unchanged at 2.63 percent, and down from 2.69 percent the previous year.

The government shutdown that began Oct. 1 was definitely the biggest factor in the rate plunge this week, but other factors contributed. “With the onset of the federal government shutdown and declining consumer confidence, fixed mortgage rates fell for the third consecutive week,” said Freddie Mac vice president and chief economist Frank Nothaft in a statement . “Consumer sentiment fell for the second month in a row in September to its lowest reading since April, according to the University of Michigan. Moreover, a recent Bloomberg survey of professional forecasters suggests that a partial federal shutdown lasting one week would shave 0.1 percentage points off of GDP growth in the fourth quarter and even more if the shutdown lasts longer.”

And with the partial shutdown of federal offices like the Social Security Administration and the IRS records department, potential mortgage borrowers may find it very difficult to obtain all the necessary documentation to snag these great rates.

“The federal government shutdown will have a growing impact on the housing market the longer it continues,” David H. Stevens, president and chief executive of the Mortgage Bankers Assn., said in a statement Thursday . “Lenders processing loans that need tax transcripts, Social Security number verification, or FHA home loans face longer delays and reduced functionality.” He warned of “confusion and fear among borrowers about whether they will be able to close on a home purchase or refinance.”

Anxious borrowers can talk to their lenders about locking in their rate, but they should be prepared to pay the accompanying fees that could grow if the shutdown continues for more than a week or two.

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