Average mortgage rates drop to lowest level in three months

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Mortgage rates dropped significantly due to economic fears driving the markets following several weeks of little or no movement, according to Freddie Mac.

30-Year FRM 15-Year FRM 5/1-Year ARM
Average Rates 4.63% 4.07% 4.04%
Fees & Points 0.5 0.5 0.3
Margin N/A N/A 2.77

The 30-year fixed-rate mortgage averaged 4.63% for the week ending Dec. 13, down from last week when it averaged 4.75%. A year ago at this time, the 30-year fixed-rate mortgage averaged 3.93%.

"Mortgage rates have either fallen or remained flat for five consecutive weeks and purchase applicants are responding with an uptick in demand given these lower rates," said Freddie Mac Chief Economist Sam Khater in a press release. "While the housing market softened in response to higher rates through most of this year, the combination of a low unemployment and recent downdraft in rates should support home sales heading into the early winter months."

The 15-year fixed-rate mortgage this week averaged 4.07%, down from last week when it averaged 4.21%. A year ago at this time, the 15-year fixed-rate mortgage averaged 3.36%.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 4.04% with an average 0.3 point, down from last week when it averaged 4.07%. A year ago at this time, the five-year adjustable-rate mortgage averaged 3.36%.

Mortgage rates are at their lowest levels since September, added Aaron Terrazas, Zillow's senior economist when that company released its own rate tracker on Dec. 12.

"U.S.-China trade tensions eased after China announced new foreign investment policies that are perceived to be more welcoming to U.S. businesses — a move that boosted stock markets and stemmed the downward trend in rates. However, political uncertainty in Europe escalated with governments in the U.K., France and Spain facing new doubts about their durability, preventing rates from moving definitively upward," Terrazas said. "Wednesday's inflation data also buoyed rates, showing stable prices over the past month despite weakness in energy prices."

Next week, however, the markets will be watching the Federal Open Market Committee meeting for indicators regarding possible rate hikes in 2019. Most observers expect the Fed to raise rates at its December meeting, "but the committee's forward guidance will be more important for long-term rates," Terrazas said. "Before that, however, eyes will be on the release of November retail data — key metrics that reflect holiday spending and consumer sentiment."

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