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Mortgage Rates Drop as Home Sales Fall

Freddie Mac released its weekly update of national mortgage rates on Thursday morning, showing continued declines in mortgage rates despite the Federal Reserve's intention to continue tapering bond purchases. Freddie Mac surveys lenders across the country between Monday and Wednesday each week and the Fed didn't announce its plans to further taper until Wednesday afternoon.

Thirty-year fixed-rate mortgages, or FRMs, slid seven basis points over the past week, dropping to 4.32%. Fifteen-year FRMs fell four basis points to 3.4%.

Adjustable-rate mortgages, or ARMs, were again mixed, with 5/1 ARMs declining three basis points to 3.12%, but one-year ARMs adding one basis point and rising to 2.55%.

Commenting on the results, Freddie Mac Vice President and Chief Economist Frank Nothaft credited weak home sales results in December (new homes sold down 7%) for keeping a lid on mortgage rates. Lower demand for houses tends to erode banks' pricing power to charge higher rates.

In a second bit of good news for homebuyers, Nothaft noted that even as mortgage rates get cheaper, the home prices themselves are moderating. In November, the S&P/Case-Shiller index of housing prices in 20 leading cities declined by 0.1%, the first such decline in the past year, Nothaft noted.

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Rich Smith

As a defense writer for The Motley Fool, I focus on defense and aerospace stocks. My job? Every day of the week, I'm monitoring the news, figuring out the winners and losers, and tracking down the promising companies for you to invest in. Follow me on Twitter or Facebook for the most important developments in defense & aerospace, and other great stories.

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