Falling Cost of Mortgages Helps Offset Rising Cost of Homes

May 29, 2014 by 247sarah

Freddie Mac this morning released its weekly update on national mortgage rates, showing continued modest declines in interest rates, nearly across the board.

Both 30-year fixed-rate mortgages, or FRMs, and 15-year FRMs got cheaper over the past seven days, with 30-year FRMs slipping two basis points to 4.12% and 15-year FRMs dropping four basis points to 3.21%. One year ago, 30-year FRMs averaged 3.81% and 15-year fixed-rate mortgages averaged 2.98%.

Five-year adjustable-rate mortgages, or ARMs, held firm at 2.96% in the most recent week. One-year ARMs dropped two basis points to 2.41%. A year ago, five-year ARMs were at 2.66% and one-year ARMs at 2.54%.

Freddie Mac Vice President and Chief Economist Frank Nothaft noted that these numbers mark the fifth-straight week of broadly declining mortgage rates.

This is curious, given that, as Nothaft pointed out in a press release, existing-home sales are up 1.3% and new-home sales rose 6.4% in April to a seasonally adjusted annual rate of 433,000, which followed an upward revision of 11,000 units for the prior two months. Ordinarily, the laws of supply and demand would dictate that increased demand for home mortgages would result in increased prices (higher rates) on those mortgages. But for as long as this trend lasts, it’s good news for homebuyers.

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Nothaft observed that “as the spring home buying season continues, we see stronger consumer confidence as house prices remain on the rise.”

The lower mortgage rates will help to offset those rises in sticker prices.

 

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