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U.S. Mortgage Rates Drop, With 30-Year Fixed at 3.51%

Feb. 28 (Bloomberg) -- U.S. mortgage rates for 30-year fixed loans fell for the first time in six weeks, decreasing borrowing costs as home-price gains accelerated.

The average 30-year rate was 3.51 percent in the week ended today, down from 3.56 percent, McLean, Virginia-based Freddie Mac said in a statement. The average 15-year rate slipped to 2.76 percent from 2.77 percent.

Borrowing costs at near-record lows, improving employment and a tight supply of properties on the market are fueling a housing rebound after the worst slump since the 1930s. The S&P/Case-Shiller index of home prices in 20 U.S. cities climbed in the 12 months through December by the most since July 2006, the group said this week.

“It’s the rising prices that is the game changer,” Patrick Newport, an economist at IHS Global Insight in Lexington, Massachusetts, said in a telephone interview yesterday. “Housing is going to be the key driver that will get economy on a higher growth path.”

Federal Reserve Chairman Ben S. Bernanke told the House Financial Services Committee yesterday that the housing market has “hit bottom” and is on the road to recovery.

Contracts to purchase previously owned U.S. homes increased 4.5 percent to the highest level since April 2010, according to data from the National Association of Realtors released yesterday.

Purchases of new homes, logged when contracts are signed, jumped in January to a 437,000 annual rate, the fastest pace since July 2008, the Commerce Department said Feb. 26.

To contact the reporter on this story: Prashant Gopal in Boston at pgopal2@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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