Hitting the bottom is not always a bad thing, especially when it comes to interest rates for consumers. 2011 goes out with thud as the interest rate on 30-year fixed-rate mortgages hit a record rock-bottom low for the last week of the year according to a recent news release from Freddie Mac containing its weekly survey of conforming mortgage rates around the nation. The good news is that the rate for 30-year-fixed rate mortgages averaged 3.91% for the week ending December 22nd, while the rate for 15-year-fixed mortgages also hit rock bottom the same week with an average of just 3.21%.
Freddie Mac’s vice president and chief economist, Frank Nothaft, was quoted in the news release saying “Rates on 30-year fixed mortgages have been at or below 4% for the last eight weeks and now are almost 0.9 percentage point below where they were at the beginning of the year, which means that today’s home buyers are paying over $1,200 less per year on a $200,000 loan.”
The new rates represent a substantial drop from rates just one year ago when the averages were 4.81% for 30-year-fixed notes and 4.15% for 15-year-fixed loans. The record-setting low rates required buyers of 30-year fixed-rate mortgages to pay of an average 0.7 of a full point, or 1% of the mortgage amount charged as prepaid interest. The 15-year fixed-rate mortgages required an average of about 0.8 point and the adjustable rate mortgages cost an average of about 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest. At the same time, Treasury mortgage loan rates were also down from last year with 5-year Treasury-indexed hybrid adjustable-rate mortgages averaging 2.85%, far less than the 3.75% it was a year ago. Treasury-indexed adjustable rate mortgages rates dropped as well, averaging just 2.77% this week, nearly a full percentage point less than the 3.4% rate one year ago.
The housing market is still in bad shape with nearly one-third of all U.S. homeowners upside down on their mortgages, but it is hoped that the new record setting low mortgage rates could help increase overall affordability and remove some of the obstacles for existing-home sales and encourage more new single-family home construction starts as well.
