Feb. 24 (Bloomberg) -- U.S. mortgage rates fell for a second week, tracking a drop in Treasury yields as violent unrest in Libya sparked demand for relatively safe investments.
The average rate for 30-year fixed loans declined to 4.95 percent in the week ended today from 5 percent, according to Freddie Mac. The average 15-year rate was 4.22 percent, down from 4.27 percent a week earlier, the McLean, Virginia-based mortgage-finance company said in a statement.
Turmoil in Libya has sent oil prices surging and spurred speculation that an economic recovery may slow. Yields on 10-year Treasury notes, which are benchmarks for some consumer loans, fell to a three-week low today. The decline has pushed mortgage rates down from a 10-month high, making home buying more affordable as demand begins to recover.
“In times of trouble, money runs to places where it can be parked safely, like Treasuries,” said Keith Gumbinger, vice president at HSH Associates, a publisher of consumer-loan data in Pompton Plains, New Jersey. “Mortgage rates tend to follow that.”
Sales of previously owned homes rose in January to the highest level since July 2010, the National Association of Realtors reported yesterday. The share represented by foreclosures and short sales rose to a 12-month high, pushing the median price to the lowest level in almost nine years.
Purchases of new homes plunged 13 percent last month, the Commerce Department said today. The drop reflected declines in the West and South that indicate a California tax credit and bad weather may have played a role.
Mortgage applications in the U.S. climbed last week from a two-year low as falling rates helped boost refinancing. The Mortgage Bankers Association’s index of loan applications increased 13 percent in the week ended Feb. 18. The group’s refinancing gauge increased 18 percent, while its measure of purchase applications climbed 5.1 percent.
Rates for a 30-year fixed mortgage reached 5.05 percent in the week ended Feb. 10, the highest since April. The decline to 4.95 percent pushed monthly payments for a $300,000 home loan to $1,601 from $1,620.
Homebuyers may respond to the lower rates because of expectations borrowing costs will rise by the end of the year as the economy improves, Gumbinger said. The rate for a 30-year fixed loan probably will average 5.1 percent in 2011, according to a forecast posted on the website of the National Association of Realtors.
“Consumers will simply enjoy this little dip we have here before the economy picks up,” Gumbinger said. “They’ll take any decline in rates they can get.”
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