Mortgage rates dropped as Europeans worrying about a Greek default beefed up investments in American mortgage-backed bonds.
The average rate for a 30-year fixed mortgage was 4%,
American borrowers are benefiting as overseas investors flock to U.S. investments after European Union ministers said they are preparing for a Greek default on bailout repayments. Greek Prime Minister Alexis Tsipras said Wednesday he was prepared to declare a "great no" to terms being imposed by his country's creditors, including the EU. Finnish Prime Minister Juha Sipila said averting Greece's insolvency would require a "miracle."
"The threat of a country like Greece withdrawing from the euro zone is creating a flight to safety that pushed down mortgage rates," said Erin Lantz, vice president of mortgages at Zillow Group Inc. "Despite all the tumult in the U.S. housing market in the last decade, our mortgage-backed assets are still seen around the world as safe investments during volatile times."
Lower mortgage rates will make home purchases more affordable as the housing market struggles to regain momentum after a drop in sales last year. Contracts to buy previously owned homes jumped in April to the highest level in nine years and more than economists projected, according to the latest National Association of Realtors report.
Mortgage rates close to historic lows may not last much longer. The Federal Reserve on Wednesday signaled that it's on track to raise near-zero borrowing costs for banks this year. New forecasts issued by the Federal Open Market Committee implied two quarter-point rises to the benchmark rate this year and a shallower pace of increases in 2016.
