McLEAN, Va. – Home mortgages rates this week declined significantly to their lowest level in five months, a result of the government takeover of Fannie Mae and Freddie Mac, according to observers.
The average for the benchmark 30-year, fixed-rate loan fell to 5.93% this week, from 6.35% last week; while the average for the 15-year, fixed-rate mortgage sank to 5.54%, from 5.90%, according to Freddie Mac.
The sharp decline pushed the 30-year rate below 6% for the first time since late May and marked the lowest level for this rate since it averaged 5.88 percent the week of April 17.
The 30-year mortgage hit a high for this year at 6.63% on July 24 and had been above 6% since late May.
Economists had predicted the Fannie and Freddie takeover would put downward pressure on loan rates by shoring up the two biggest players in the secondary market.
“When you take the risks out of the market it will lower the rates,” said Bill Hampel, chief economist for CUNA.
“The main reason for it is definitely the reaction to the recent government actions on Fannie Mae and Freddie Mac,” Katrin O’Connor, senior economist at NAFCU, told The Credit Union Journal. “The move created more confidence in the market.”
“The question is,” she added, “how can they carry this over? Can they keep up this confidence and stabilize the market for the longer term?”
ARM rates were mixed, with the average for the five-year ARM also dipping to 5.87% this week, form 5.97% last week; but the average for the one-year ARM rose to 5.21%, from 5.15%.
A year ago, rates on 30-year mortgages averaged 6.31%; 15-year mortgage rates averaged 5.97%, five-year ARM rates were at 6.17% and one-year ARM rates at 5.66%.
