Mortgage rates hit new record low, may be nearing an inflection point

The survey rate for a 30-year Freddie Mac home loan fell to a record low for the eighth time this year as new unemployment numbers drop and government officials remain at an impasse on a second rescue bill.

“The market was sort of waiting for some pivotal sign of either good news or bad news that indicates the path forward, and I think they got some of that bad news in the federal government’s inability to come to an agreement on the next wave of fiscal relief,” said Zillow Economist Matthew Speakman. “When that deadline passed, particularly the expiration of the enhanced unemployment benefits, the market took that as a pessimistic sign and it influenced mortgage rates downward.”

At 2.88%, the average 30-year Freddie Mac rate was down slightly from 2.99% the previous week and represents a significant drop from 3.6% a year ago.

The average 15-year rate was 2.44%, down from 2.51% a week ago and 3.05% a year ago. The average five-year hybrid rate was 2.9%, down from 2.94% the previous week and 3.36% 12 months ago.

The 15-year fixed rate and the rates on more scarcely-used hybrid loans are typically lower than for 30-year fixed rate products.

However, 15-year fixed-rate loans may require larger payments, and rates on hybrid products can fluctuate.

What happens next to rates may depend on Friday’s report on U.S. employment.

Mortgage rate predictions from economists like Speakman suggest the cost of home loans will continue to fall if the jobs report is weak. If the report shows employment is stronger than expected, mortgage rates could stabilize or move higher.

“The last two jobs report were really quite strong as the nation’s trying to recoup the 22 million or so jobs lost this spring,” Speakman said. “This one is not such a sure thing.”

So far, rates have been low enough to offset economic concerns for lenders by generating healthy levels of mortgage application activity, but some uncertainty looms considering that applicant numbers did falter slightly last week.

The Mortgage Bankers Association’s data, which lags Freddie Mac’s by roughly a week and encompasses wider ranges of loan types, pegged the average 30-year contract rate for conforming loans with a balance of $510,410 or less at 3.14%.

Rates for other 30-year fixed-rate loan types as measured by the MBA were as follows: 3.51% for jumbos with balances above the conforming limit and 3.27% for mortgages insured by the Federal Housing Administration limit.

The average rate for 15-year mortgages in the MBA’s survey was 2.51% and the average rate for five-year hybrids was 2.94%.