Low home mortgage rates continue to spur active housing market
By Janice Chamberlain -- Furniture Today, April 13, 2005
McLean, Va. — 2004 was another record year for the home mortgage business, with the rate for a 30-year fixed-rate mortgage averaging 5.84%, according to Freddie Mac, the federally chartered corporation that buys mortgages from lenders and repackages them into investor-purchased securities. The rate was paired with 0.7 points.
So far in 2005, Freddie Mac reported the average rate was 5.71% in January, 5.63% in February and 5.93% in March. Points needed for those rates stayed constant at 0.7. On an annualized basis, including the first week of April, the average 30-year rate is 5.78%, combined with 0.7 points.
The high point for 30-year fixed-rate mortgages was 1981's 16.63%, and the June 2003 rate of 5.23% is the all-time low since Freddie Mac began its weekly survey. The 1981 rate was coupled with 2.1 points, while the June 2003 rate required just 0.6 points.
The low point for 2004 was 5.45%, reported in February, combined with 0.7 points. 2004's highest interest rate was the 6.29% reported for May, paired with 0.6 points.
Freddie Mac also said that 15-year fixed-rate mortgages and 1-year adjustable-rate mortgages have dropped in recent weeks. The latest weekly rate, for April 7, for a 15-year mortgage is 5.29%, compared with 5.48% for the previous week. The latest weekly 1-year adjustable rate is 4.23%, measured against 4.23%, even with the week ended March 31.
The April 7 and March 31 30-year rates both included 0.7 points. The April 7 1-year adjustable rate was combined with 0.7 points and the comparable points for the prior week were 0.8 points.
Frank Nothaft, Freddie Mac's chief economist, called the first-quarter 2005 housing market "jolly good," with new home sales rising 9.4% in February and sales of existing homes, condos and co-ops also "running at a brisk rate." Housing starts also gained in February, up 0.5% over January and surging 15.8% over February 2004.
"We expect that mortgage rates will gradually rise throughout this year," Nothaft said, "with 30-year fixed mortgage rates averaging near 6.25% at year-end, and home sales likely declining about 3% from last year's volume."
Mortgage markets also had an active first quarter, with refinancing activity coming in at just below 50% of new mortgage applications, and new mortgage applications at a level not seen since April 2004, according to the Mortgage Bankers Assn. Applications Survey.
Nothaft said the first quarter of 2005 might be the last quarter to report 30-year fixed rates below 6%, at least for a while. "We expect to see inflationary expectations feeding into the 30-year fixed rate mortgage and as a result push this rate to about 6.4% by the fourth quarter," he said.
As for mortgage originations, Freddie Mac expects a decline from more than $600 billion in the first quarter to about $439 billion by the end of the year. In response to rising mortgage rates, the refinance share of originations is expected to fall from 48% of the total to 32% in the fourth quarter. For all of 2005, refinance volume is anticipated to represent 35% of originations.
Freddie Mac, formally known as the Federal Home Mortgage Corp., estimates that, coupled with the relatively low mortgage rates, total home sales may set a record again this year.
Over the next decade, Freddie Mac estimates more than 50 million families will take on new mortgages. Since the stockholder-owned corporation was chartered in 1970, Freddie Mac has financed homes for nearly 30 million families, equal to one of every six homes in the United States.
Since April 1971, Freddie Mac has surveyed lenders across the nation weekly to determine the average 30-year fixed-rate mortgage rate. In 1984, the 1-year adjustable-rate mortgage was added to the survey, and the 15-year fixed-rate mortgage was included beginning in 1991.
Currently, 125 lenders, representing commercial banks, thrifts and mortgage-lending companies, are surveyed each week. Their responses are weighted by Freddie Mac in proportion to the level of mortgage business that each commands nationwide.
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Low mortgage rates spur housing market
Apr 15, 2005
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