Rates on the most popular types of mortgages dropped considerably this week, especially those for fixed-rate mortgages, according to HSH.com's Weekly Mortgage Rates Radar. The average rate for conforming 30-year fixed-rate mortgages (FRMs) fell by 13 basis points (0.13 percent) to 3.83 percent. Conforming 5/1 Hybrid ARM rates decreased by five basis points, closing the Wednesday-to-Tuesday wraparound weekly survey at an average of 3.12 percent.
"It's a new year, but there are plenty of old-year concerns still about," says Keith Gumbinger, vice president of HSH.com. "The fall in oil prices from late 2014 continues, and is now raising concerns about deflation. Inflation falling from already-low levels would not be welcomed by central bankers, who are trying to prop up prices and foster economic growth."
Amid expectations of lower inflation, investors will accept lower yields on their bond holdings, as there is a smaller chance that the fixed returns on bonds they hold will be eroded by higher future prices. In turn, this smaller “inflation premium” allows interest rates to slip.
Investors are also again moving funds out of riskier stock investments and pushing fresh cash into U.S. Treasuries in a flight-to-safety and quality move. With the uncertain global effects of a shaky Euro and less clarity on which economies might be hurt by lower energy prices, investors shifting money to get out of harm's way provides more downward pressure on mortgage and other interest rates.
"As has been the case, global uncertainty continues to be the friend of the American homebuyer and homeowner," said Gumbinger. "Rates this week are again among the best seen since May 2013, and with the holiday season fading behind us, homeowners and homebuyers have a great chance to jump into the market."
Average mortgage rates and points for conforming residential mortgages for the week ending Jan. 6, according to HSH.com:
Conforming 30-year fixed-rate mortgage
►Average rate: 3.83 percent
►Average points: 0.19
Conforming 5/1-year adjustable-rate mortgage
►Average rate: 3.12 percent
►Average points: 0.09
Average mortgage rates and points for conforming residential mortgages for the previous week ending Dec. 30 were, according to HSH.com:
Conforming 30-year fixed-rate mortgage
►Average rate: 3.96 percent
►Average points: 0.15
Conforming 5/1-year adjustable-rate mortgage
►Average rate: 3.17 percent
►Average points: 0.09
