Mortgage rates in the US dropped in the latest week, according to a closely watched mortgage survey yesterday, with rates still at low levels that should work well for the housing market.
Lower mortgage interest rates may sustain home loan refinancing activities, pouring more cash into the hands of customers to funnel into the US economy. It also makes homes more affordable during the spring selling season.
According to a survey released by Freddie Mac, interest rates on 30-year fixed-rate mortgages, the most commonly used home loans in the US, was 5.06 percent for the week that ended April 29, down from 5.07 percent on the previous week. This was above the 4.80 percent a year ago and 4.71 percent in early December.
"Mortgage rates on 30-year fixed loans have averaged about 5 percent over the first four months of this year, staying within a band of roughly a quarter percentage point and virtually matching 2009’s annual average," said Frank Nothaft, chief economist and vice president of Freddie Mac.
"These low rates have been helping to moderate house price declines over the course of the year," he added.
Mortgage rates are expected to increase this year, as the US economy is also expected to improve and after the Federal Reserve ended its programme of mortgage-related securities purchases in March.
The federal government’s $6,500 credit for home owners purchasing a new home and $8,000 tax credit for first-time homebuyers will expire soon. Qualified borrowers must sign a contract by today and close loans by June 30.
Jim Gillespie, CEO and president of Coldwell Banker in New Jersey, said this has helped boost demand. "The federal tax credits certainly helped the economy and the housing market overall,” he said.