With home prices on the rise, the housing market recovery will likely be motive for more prospective buyers to make the leap into homeownership. While prices may not contribute to overall affordability, mortgage rates have continued to linger near record lows in recent months and experienced a week-over-week decline according to Freddie Mac's most recent Primary Mortgage Market Survey for the week ending March 21.
Despite having increased the week before, the average rate for 30-year fixed-rate mortgages slipped to 3.54 percent from 3.63 percent recorded the previous week. The drop pushed the average rate even further from the 4.08 average rate recorded this time last year. This remains the most popular mortgage option for first-time buyers, as it provides the lowest monthly payments, however, those refinancing their initial mortgage may also be interested in lower rates when looking to lower their monthly mortgage payments.
The average rate for 15-year FRMs also took a hit, dropping to 2.72 percent from 2.79 percent from one week earlier. The average is still significantly lower than the 3.3 percent rate noted in mortgage records from this same time a year ago.
ARM averages slip slightly or were unchanged
While adjustable-rate mortgages aren't as popular for those making their first investment by purchasing a home, the climbing averages may be another reason for a lower share of applications for refinancing, as revealed in recent reports from the Mortgage Bankers Association. The average rate for 5-year ARMs matched the 2.61 percent average from last week, but it is still around the 2.96 percent rate recorded this time last year.
In addition, the average rate for 1-year Treasury ARMs fell to 2.63 percent from 2.64 percent recorded the week before. In recent weeks the average has been growing closer to the 2.84 percent rate from this time a year ago.
"Low and stable inflation is placing downward pressure on fixed mortgage rates," said Frank Nothaft, vice president and chief economist of Freddie Mac. "Annual growth in the consumer price index has remained at or below 2 percent for the past four months, and for the producer price index even lower. This, in part, is why the Federal Reserve monetary policy committee on March 20th lowered the upper end of its inflation forecast for 2013. In addition, our March Outlook calls for 30-year fixed mortgage rates to remain below 4 percent throughout this year."