Rates on the 30-year loan have been below 4 percent since earlyDecember. The low rates are a key reason the housing industry isshowing modest signs of a recovery this year. A drop in rates could also provide some help to the economy if morepeople refinance. When people refinance at lower rates, they payless interest on their loans and have more money to spend. |
A Federal Reserve survey issued Wednesday showed the economy growing moderately inmost regions of the country this spring as companies continuedhiring. Manufacturing and home sales improved in most of the Fed's12 regional districts, as did residential and commercialconstruction. In April, sales of both previously occupied homes and new homesrose near two-year highs. Builders are gaining more confidence inthe market, breaking ground on more homes and requesting morepermits to build single-family homes later this year.
Mortgage applications rose by 1.3 percent during the week endedJune 1, the Mortgage Bankers Association reported Wednesday, mainlybecause more people applied to refinance their homes. Applicationsto buy a home actually fell for the fourth straight week. A better job market also has made more people open to buying ahome. But a dismal jobs report for May from the government lastFriday fanned fears that the economy is sputtering. U.S.
employers created only 69,000 jobs in May, the fewest in ayear, and the unemployment rate ticked up. The Labor Department also said the economy created far fewer jobsin the previous two months than first thought. It revised thosefigures downward to show 49,000 fewer jobs created. Theunemployment rate rose to 8.2 percent in May from 8.1 percent inApril, the first increase in 11 months. The pace of home sales remains well below healthy levels.Economists say it could be years before the market is fully healed.
Many people are having difficulty qualifying for home loans orcan't afford larger down payments required by banks. Some would-behome buyers are holding off because they fear that home pricescould keep falling. Mortgage rates have been dropping because they tend to track theyield on the 10-year Treasury note, which fell last week to a66-year low. Uncertainty about how Europe will resolve its debt crisis has led investors to buy moreTreasury securities, which are considered safe investments.
Asdemand for Treasurys increase, the yield falls. To calculate average rates, Freddie Mac surveys lenders across thecountry on Monday through Wednesday of each week. The average does not include extra fees, known as points, whichmost borrowers must pay to get the lowest rates. One point equals 1percent of the loan amount. The average fee for 30-year loans was 0.7 point, down from 0.8 lastweek.
The fee for 15-year loans also was unchanged at 0.7 point. The average rate on one-year adjustable rate mortgages rose to 2.79percent from 2.75 percent last week. The fee for one-yearadjustable rateloans was steady at 0.4.
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