Mortgage rates dropped across the board for the week ending Aug. 30 as Treasury bond yields declined and the Federal Reserve suggested more stimulus could be on the way.
The 30-year, fixed-rate mortgage averaged 3.59% for the week, down from 3.66% seven days earlier and from 4.22% last year, Freddie Mac said Thursday.
In addition, the 15-year, FRM hit 2.86%, which compares to 2.89% last week and 3.39% a year earlier.
The 5-year Treasury-indexed hybrid ARM also fell to 2.78%, while the 1-year Treasury-indexed ARM declined to 2.63% from 2.66%.
"Treasury bond yields fell, allowing mortgage rates to follow, after the release of the July 31 and August 1minutes of the Federal Reserve’s monetary policy committee," said Frank Nothaft, vice president and chief economist of Freddie Mac. "Committee members agreed that economic activity had decelerated more in recent months than they had anticipated at their last meeting in June. Some members even saw room for additional stimulus fairly soon if needed."
Even though rates are falling on weaker economic confidence, the housing market is slightly more robust, Nothaft suggested.
"New home sales rose 3.6% in July matching May’s pace as the strongest month since April 2010," he said. "Similarly,pending existing home sales also rose in July to its highest rate since April 2010. And, the S&P/Case-ShillerNational Home Price Index rose 1.2% between the second quarter of 2011 and 2012, reflecting the first annual increase since the second quarter of 2010."
The benchmark 30-year, FRM declined to 3.8% from 3.91%, while the 15-year, FRM declined to 3.03% from 3.12%. In addition, the benchmark 5/1 ARM fell to 2.8% from 2.9%.