US rate on 30-year mortgage falls to 3.98 percent

[April 06, 2012]  WASHINGTON (AP) -- The average U.S. rate on the 30-year fixed mortgage was mostly unchanged this week, as the cost of home-buying and refinancing stayed near record lows.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan fell slightly to 3.98 percent from 3.99 percent last week. In February, the rate touched 3.87 percent, the lowest since long-term mortgages began in the 1950s.

The average rate on the 15-year fixed mortgage also fell, to 3.21 percent from 3.23 percent. That's above the record low of 3.13 percent hit last month.

Mortgage rates have been below 4 percent for all but one week since early December. That's helped lift the outlook for housing after four sluggish years of home sales. Still, most economists expect only modest gains.

January and February made up the best winter for re-sales in five years, when the housing crisis began. And builders are more confident about the market. In February, they requested the most permits to build single-family homes and apartments in more than three years.

Applications for new mortgages rose in March, according to the Mortgage Bankers Association, and there was a sharp rise in the average loan size, suggesting a bigger appetite for home loans. The average size of mortgage applications has increased by $20,000 since December, to about $235,000 last month.

An improved job market is driving the modest increase in home sales. Employers have added an average 245,000 net jobs per month from December through February. The unemployment rate has dropped from 9.1 percent in August to 8.3 percent in February, the lowest level in nearly three years.

Frank Nothaft, Freddie Mac's chief economist, said rates were little changed this week amid mixed signals on the health of the U.S. economy.

He pointed to minutes from the Federal Reserve's mid-March meeting, which showed officials were less inclined to take further action to stimulate the economy. The Fed noted that the job market has strengthened, although it cautioned that the housing market remains depressed.

Home prices continue to fall. Prices tend to lag sales and millions of foreclosures and short sales -- when a lender accepts less than what is owed on a mortgage -- remain on the market. And the housing crisis and recession have also persuaded many Americans to rent instead of buy, which has led to a drop in homeownership.

Mortgage rates tend to track the yield on the 10-year Treasury note. An improved economic outlook has led investors to shift money from U.S. Treasury bonds to stocks. That pushes up Treasury yields, which move in the opposite direction of the price.

To calculate the average rates, Freddie Mac surveys lenders across the country on just Monday through Wednesday of each week.

The average rates don't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for the 30-year fixed loan was 0.7. For the 15-year fixed loan, the average fell to 0.7 from 0.8.

For the five-year adjustable loan, the average rate fell to 2.86 percent from 2.90 percent, and the average fee was unchanged at 0.8.

The average on the one-year adjustable loan was unchanged at 2.78 percent, and the average fee was unchanged at 0.6.

[Associated Press; By DEREK KRAVITZ]

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