US mortgage rates weekly drop most in over 28 years

Reuters
September 11, 2008

NEW YORK - Interest rates on U.S. 30-year fixed-rate mortgages fell by 0.42 percentage point in the latest week, the biggest weekly drop in more than 28 years, according to a survey released on Thursday by home funding company Freddie Mac.

The drop, which drove 30-year fixed rates to an almost five-month low, was driven by the U.S. government's rescue effort for the mortgage finance company and its larger sibling Fannie Mae, analysts say.

Interest rates on the 30-year fixed-rate mortgage averaged 5.93 percent for the week ending Sept. 11, down from the previous week's 6.35 percent, Freddie Mac said in its weekly Primary Mortgage Market Survey.

It was the largest weekly drop since May 1980 when interest rates on the 30-year fixed-rate mortgage averaged 14.68 percent, down from 15.90 percent.

Interest rates on the 30-year fixed-rate mortgage are at their lowest level since the week ended April 17, when the rate averaged 5.88 percent.

The U.S. government seized control of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) on Sunday, launching what could be its biggest federal bailout ever, to support the U.S. housing market and ward off more global financial market turbulence.

The 15-year fixed-rate mortgage averaged 5.54 percent, down from 5.90 percent.

"Interest rates for 30-year fixed-rate mortgages are down almost 0.6 percentage points over the past 4 weeks, which will help to spur home purchases and loan refinancing in coming weeks," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

Therefore, the monthly principal and interest payment on a new $200,000 loan is down by more than $76 from a month ago, he said.

One-year adjustable rate mortgages, or ARMs, however, rose in the week to an average of 5.21 percent from 5.15 percent last week.

Freddie Mac said the "5/1" ARM, set at a fixed rate for five years and adjustable each following year, averaged 5.87 percent compared with 5.97 percent a week earlier.

A year ago, 30-year mortgage rates averaged 6.31 percent, 15-year mortgages 5.97 percent and the one-year ARM 5.66 percent. The 5/1 ARM averaged 6.17 percent.

Lenders charged an average of 0.7 percent in fees and points on 30-year mortgages, unchanged from the previous week.

Fees and points averaged 0.7 percent on 15-year mortgages and the 5/1 ARM, up from 0.6 percent last week. The one-year ARM fees and points were 0.6 percent, unchanged from the previous week.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio. (Reporting by Julie Haviv; Editing by Leslie Adler)