Mortgage Rates Fall to 18-Month Low with 30-Year at 3.89%

Mortgage rates for 30-year loans fell for a fourth week, reducing borrowing costs to the lowest level in a year and a half.

The average rate for a 30-year fixed mortgage was 3.89%, down from 3.97% last week, Freddie Mac said in a statement today. That was the lowest since May 2013. The average 15-year rate dropped to 3.1% from 3.17%, the McLean, Va.-based mortgage-finance company said.

Lower borrowing costs are helping to make housing purchases more affordable as values rise across much of the country. Home prices rose 6.1% in October, the 32nd straight year-over-year increase, CoreLogic Inc. said this week.

"Lower mortgage rates would be a net positive for the U.S. housing market and the economic recovery more generally," Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York, said in a phone interview. "It improves affordability and provides a greater incentive for people on the sidelines, waiting for rates to fall."

Sales demand has been choppy. New-home sales rose at a slower pace than analysts forecast in October, according to Commerce Department data released last week. Contracts to purchase previously owned homes unexpectedly dropped in the month, the National Association of Realtors said Nov. 26.