Mortgage rates for 30-year loans fell for a fifth week as stock market volatility and weaker-than-expected economic reports drove investors to the safety of the government bonds that guide borrowing costs.
The average rate for a 30-year fixed mortgage was 4.23% this week, down from 4.32% and the lowest since November, Freddie Mac said today. The average 15-year rate dropped to 3.33% from 3.4%.
Yields for 10-year Treasuries, a benchmark for consumer debt, dropped to a three-month low this week following a private report that showed manufacturing in January slowed more than economists forecast.
The Standard & Poor's 500 Index lost more than 5% since reaching a record on Jan. 15. The effect on mortgage rates will be temporary as the Federal Reserve continues to unwind stimulus measures, according to Greg McBride, chief financial analyst at Bankrate.com.
“The economy doesn’t improve in a straight line,” McBride said in a telephone interview yesterday. “It’s like Sunday afternoon in New York City, it was 50 degrees. It doesn’t change the fact it was still winter. The improving economy and the Fed dialing back stimulus mean that rates will move higher as the year unfolds.”
The central bank is tapering the bond purchases that have kept borrowing costs close to historic lows. The Federal Open Market Committee said last week it will trim monthly buying to $65 billion, its second $10 billion reduction.
Low mortgage rates have helped provide a foundation for the housing recovery. U.S. home prices rose 11% in December from a year earlier, the 22nd straight increase, Irvine, Calif.-based CoreLogic Inc. reported two days ago.