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Week after week, long-term home loan interest rates dropped further into record low territory in August, according to mortgage giant Freddie Mac, continuing their trend of the past two months.
August 5
The month began with a dramatic drop below five-and-a-half percent for 30-year fixed rate mortgage (FRM). The average rate, excluding points, fell to 4.49 percent the first time in the history of the 40-year, down from 4.54 percent the week before. Fifteen-year FRMs carried and average rate of 3.95 percent, down from 4.00, and one-year adjustable mortgages (ARMs) sank to 3.55 percent from 3.64 percent a week earlier.
Frank Nothaft, Freddie Mac vice president and chief economist, said the rate decrease was essentially due to reports of slow GDP growth."And yet again, interest rates for fixed-rate mortgages ...fell to all-time record lows this week following the second quarter GDP release. Annual revisions cut the cumulative GDP growth in half over the past three years ending in the first quarter of 2010 from 1.4 percent to 0.6 percent. This reduces inflationary pressures and allows longer-term rates room to ease.
August 12
During the second week, rates slipped down again, with the 30-year FRM average at 4.44 percent, the 15-year FRM rate averaging 3.92 percent and the one-year ARM inching down to 3.53 percent.
August 19
Although not by much, rates continued to descend in the next week. The 30-year FRM rate eased to 4.42 percent, the 15-year FRM to 3.90 percent and the one-year ARM was unchanged at 3.53 percent.
August 26
More bad economic news sent rates plunging to new lows at the end of August. "Existing home sales plunged 27 percent in July, while new homes fell 12 percent to a new all-time record low, which led to some market concerns that the housing market may slow the economic recovery," said Amy Crews Cutts, Freddie Mac deputy chief economist. "As a result, long-term bond yields fell to the lowest levels since January 2009, allowing fixed mortgage rates to ease to new record lows this week."
The 30-year FRM average ended the month at 4.36 percent, the 15-year FRM moved down to 3.86 percent, and the one-year ARM stepped down to 3.52 percent.
What's Next for Interest Rates?
Even though a few months ago it would have been inconceivable to think of rates sinking as low as they now are, the market data has given so many hints of delayed recovery that it is still possible for rate to decline again in September.
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