Mortgage Rate Drops to 4-Month Low

WASHINGTON (AP) -- Average U.S. rates on fixed mortgages dropped this week to their lowest levels in four months, a positive sign for the housing recovery.

Mortgage buyer Freddie Mac says the average rate on the 30-year loan fell to 4.13%. That's down from 4.28% the previous week. The average on the 15-year fixed loan declined to 3.24% from 3.33%.

Both averages are the lowest since June 20. A year ago, 30-year fixed-rate mortgages averaged 3.41% while 15-year fixed-rate mortgages averaged 2.72%

Mortgage rates have been falling since September, when the Federal Reserve held off slowing its $85-billion-a-month in bond purchases. The bond buys are intended to keep longer-term interest rates low, including mortgage rates.

And a slowdown in hiring in September makes it more likely that the Fed will continue its stimulus into next year.

Frank Nothaft, vice president and chief economist, Freddie Mac, said in a statement that "mortgage rates slid this week as the partial government shutdown led to market speculation that the Federal Reserve will not alter its bond purchases this year. The weak employment report for September added to this expectation."

Mortgage rates tend to follow the yield on the 10-year Treasury note. The 10-year note traded at 2.50% Wednesday, down sharply from 2.61% last Thursday.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1% of the loan amount.

The average fee for a 30-year mortgage ticked up to 0.8 point from 0.7 point. The fee for a 15-year loan declined to 0.6 point from 0.7 point.

The average rate on a one-year adjustable-rate mortgage fell to 2.60% from 2.63%. The fee rose to 0.5 point from 0.4 point.

The average rate on a five-year adjustable mortgage dropped to 3.00% from 3.07%. The fee was unchanged at 0.4 point.

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