As 10-year Treasury yields closed at their lowest level since May 2013, mortgage rates this week fell to their lowest mark of 2014, with the 30-year fixed at 3.80 percent, Freddie Mac said today.
Not-so-rosy housing data released over the last few days also helped drive rates down, said Frank Nothaft, vice president and chief economist, Freddie Mac.
November housing starts came in at a seasonally adjusted annual rate of 1.028 million starts, down 1.6 percent from an upwardly-revised October value.
“Housing starts for the calendar year will likely come in around 1.0 million, above the 2013 pace — but lower than forecasters had expected at the start of 2014,” Nothaft said. “Consumer prices declined more than expected in November, with CPI contracting 0.3 percent.”
Falling consumer prices, led by the cheapest gas at the pump in years, is a major factor in the Federal Reserve’s formula to determine the beginning of higher interest rates.
The Federal Reserve this week sharply cut its forecast for inflation next year, saying it will remain far below its 2 percent target through 2015.
The lower inflation forecast means the Fed could keep its benchmark interest rate at its record-low level of nearly zero for a longer period than earlier anticipated. But there is no clear time-table. Fed policy-makers closed out their meeting this week, maintaining that its benchmark federal funds rate will remain at near zero for a “considerable time.”
Here’s the rundown on interest rates from Freddie Mac:
30-year fixed-rate mortgage (FRM) averaged 3.80 percent, with an average 0.6 point for the week ending December 18, 2014, down from last week when it averaged 3.93 percent. A year ago at this time, the 30-year FRM averaged 4.47 percent.
15-year FRM this week averaged 3.09 percent, with an average 0.6 point, down from last week when it averaged 3.20 percent. A year ago at this time, the 15-year FRM averaged 3.52 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.95 percent this week, with an average 0.5 point, down from last week when it averaged 2.98 percent. A year ago, the 5-year ARM averaged 3.00 percent.
1-year Treasury-indexed ARM averaged 2.38 percent this week, with an average 0.4 point, down from last week when it averaged 2.40 percent. At this time last year, the 1-year ARM averaged 2.56 percent.