Mortgage Interest Rates Stabilize
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UPDATED: Mar 7, 2013
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Mortgage interest rates remained steady this week according to Freddie Mac survey results.
Frank Nothaft, vice president and chief economist at Freddie Mac, said the low mortgage interest rates are helping to revive the housing market.
For the week ending March 7, 2013, the 30-year fixed rate for mortgages averaged 3.52 percent with a 0.7 point average, up from last week’s 3.51 percent average. In addition, the 15-year FRM averaged 2.76 percent with a 0.7 point average, the same as last week.
The survey also found the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.63 percent with a 0.5 point, up from last week when it averaged 2.61 percent. In addition, the 1-year Treasury-indexed ARM averaged 2.63 percent with an average 0.3 point average, down from 2.64 percent last week.
The U.S. Department of Commerce reports that Gross Domestic Product (GDP) only grew 0.1 percent in Q4 2012, causing a standstill for inflation.
Len Kiefer, deputy chief economist at Freddie Mac, said that because housing demand is tied closely to employment and income, an increase in GDP would be beneficial for the housing market.
“With interest rates near historic lows and housing affordability extremely high, the main factor holding back demand for housing is lack of income, or employment,” Kiefer told loans.org. “As the economy grows faster, more jobs will be created, which will in turn enable more households to buy or rent.”
Kiefer said the fact that inflation remains low is key for the housing recovery.
“It allows the Federal Reserve to continue its accommodative policy. Were inflation to increase sharply, the Fed might stop some of its actions, which could raise short term interest rates, ultimately causing mortgage rates to rise,” he said.
Kiefer said the good news from the end of 2012 has continued on in early 2013.
“Possibly the best sign is house prices have been increasing in these early months when historically they are at their weakest,” he said.
The CoreLogic home price index rose 9.7 percent between January 2012 and January 2013. This marked the largest annual increase in home price since April 2006.
Kiefer said as housing prices increase, more homeowners will be interested in selling and more borrowers will rise above their underwater status.