The average rates on fixed mortgages in the U.S. have moved closer to their past record lows this last week, allowing eligible candidates a better chance at purchasing an affordable home and therefore helping to stabilize the housing market.
Freddie Mac announced last Thursday that the standard rate for a 30-year loan went down from 3.35 percent to 3.34 percent, getting closer to the 3.31 rate that was reached this past November. The 3.31 rate is the lowest recorded fixed mortgage rate since 1971.
For 15-year fixed mortgages, the average rate went from 2.65 percent to 2.64 percent last week, getting closer to the record low rate of 2.63 percent.
According to Freddie Mac, in 2012 the average rate on a 30-year fixed mortgage was approximately 3.55 percent, which is the lowest annual rate in 65 years.
The fact that the rates are continuing to drop is a very positive change for the housing market. Cheaper rates are one of the main reasons the housing market began to recover in 2012, and a variety of economists are hopeful that the housing recovery will continue to strengthen this year.
Starting in November, sales on homes that were previously occupied reached a higher level than they have in the past three years, and newly built homes hit a record 2-year high. With the cost of homes slowly increasing, consumers are starting to feel more secure with the economy, which in turn makes them a lot more likely to spend money that they may have held onto in the early days of the real estate and economic fallout. Additionally, currently there are less houses for sale in the U.S. compared to 3 years ago – the number of newly built homes for sale at the end of November was extremely low, and the number of previously occupied homes available for sale was even lower-in November, the supply was at an 11-year low.
This minimal supply of available homes has created an increased need for new construction, allowing for a steady workflow for builders and an increased sense of confidence in the housing market.
Nevertheless, the journey to full recovery is not yet complete, and there are still large amounts of individuals that are unable to qualify for mortgages due to the stricter guidelines or they simply cannot afford a down payment due to their own experiences with the economic crisis.
Average mortgage rates are calculated by Freddie Mac via lender surveys that are administered throughout the U.S. Monday through Wednesday on a weekly basis. The calculation does not include points, (extra fees) that must be paid by the borrower in order to get the lowest rate.
Each point is equivalent to 1 percent of the total loan amount. The average fee on a 30-year loan was 0.7 point, the same calculation as last week, and the average fee on a 15-year loan went from 0.7 point to 0.6. On a 5-year adjustable rate mortgage, the fee rose a point from 2.56 to 2.57, and for 1-year adjustable rate loans, the number dropped from 0.5 point to 0.4. For a 5-year adjustable rate mortgage, the rate went up a point from 2.70 percent to 2.71 percent, and the fee went down from 0.7 point to 0.6 point.
These record lows are a big step in the right direction for prospective homebuyers. While there is still a way to go before the housing market is completely recovered, lenders and borrowers are starting to see the light at the end of the tunnel, which definitely signals a positive change in the housing market.