Mortgage rates for 30-year U.S. loans declined, reducing borrowing costs for homebuyers after the biggest jump in 26 years.
The average rate for a 30-year fixed mortgage fell to 4.29 percent from a two-year high of 4.46 percent last week, McLean, Virginia-based Freddie Mac said in a statement today. The average 15-year rate dropped to 3.39 percent from 3.5 percent.
Rates are adjusting after spiking over expectations that the Federal Reserve will scale back bond purchases, said Keith Gumbinger, vice president of HSH.com, a Riverdale, New Jersey-based mortgage-information website. Last week’s increase in the 30-year average was the biggest since 1987.
“We see rates starting to settle back after the panic move,” Gumbinger said yesterday.
The average 30-year rate has increased from a near-record low of 3.35 percent in early May. It is still well below the average of about 5.3 percent over the past 10 years, according to data compiled by Bloomberg.
Buyers seeking to take advantage of rates before they climb further are competing for a tight supply of listings, driving up values. U.S. home prices rose 12.2 percent in May from a year earlier, the largest increase since February 2006, Irvine, California-based CoreLogic Inc. said yesterday.
The increase in borrowing costs is having more of an effect on refinancing than purchases. The Mortgage Bankers Association index of refinance applications declined 15.6 percent in the week ended June 28 to the lowest level since July 2011, the Washington-based trade group said today. The gauge for purchase applications fell 3.1 percent, while remaining 12 percent higher than a year ago.
“It’s possible that the rise in rates is encouraging those thinking about buying to commit to a purchase now to avoid further rate hikes, hence the resilience of applications for home purchase,” Paul Diggle, property economist at Capital Economics Ltd. in London, wrote in a note today. “But the bigger point is that, with rates still at historically very low levels and affordability favorable, there’s no reason that housing demand cannot continue strengthening.”