Mortgage rates sink to lowest this year

Mortgage rates have fallen to the lowest level of the year as investors poured money into the safe haven of U.S. government securities.
By: ALAN ZIBEL: AP Associated Press
The average rate on a 30-year fixed rate mortgage dipped to 4.78 percent this week from 4.84 percent a week earlier, mortgage company Freddie Mac said Thursday. It was the lowest level since early December, when rates fell to a record low of 4.71 percent.

The average rate on a 15-year fixed-rate mortgage fell this week to 4.21 percent_ the lowest level in nearly two decades.

Concerns over the European debt crisis have sent yields for 10-year and 30-year Treasury bonds to their lowest levels of 2010. Rates on 30-year home loans often rise and fall in line with the 10-year note.

Analysts say the opportunity may not last. If Europe's woes subside and the U.S. economic recovery stays on track, rates are likely to move higher. That's because traders will move their money back into riskier investments.

"Strike now," said Greg McBride, senior financial analyst at Bankrate.com. "If they move quickly against you, it just takes money right out of your pocket."

Homeowners appear to be taking notice. Applications to refinance surged this week to the highest level since October 2009, the Mortgage Bankers Association said Wednesday.

But mortgage applications to purchase homes fell to the lowest level since April 1997. A major reason for that drop: tax credits expired on April 30.

A campaign by the Federal Reserve to reduce borrowing costs for consumers pushed rates down to extraordinarily low levels last year. Rates were expected to rise after the program ended this spring. Instead, they have dipped. Fears that Greece's government would default on its debt shook world markets and boosted demand for U.S. Treasurys.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

Rates on five-year, adjustable-rate mortgages averaged 3.97 percent, up from 3.91 percent a week earlier. Rates on one-year, adjustable-rate mortgages fell to 3.95 percent from 4 percent. That was the lowest average since May 2004.

The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.

The nationwide fee for loans in Freddie Mac's survey averaged 0.7 a point for 30-year, 15-year and 5-year loans. The average fee for 1-year loans was 0.6 of a point.