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VOL. 127 | NO. 195 | Friday, October 05, 2012

30-Year Mortgage Rate Hits Record 3.36 Percent

MARCY GORDON | AP Business Writer

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WASHINGTON (AP) – Average U.S. rates on fixed mortgages fell to fresh record lows for the second straight week. The declines have led more homeowners to refinance, a trend that could help jumpstart the economy.

Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan dropped to 3.36 percent. That's down from last week's rate of 3.40 percent, which was the lowest since long-term mortgages began in the 1950s.

The average on the 15-year fixed mortgage, a popular refinancing option, dipped to 2.69 percent, down from last week's record low of 2.73 percent.

Rates are falling after the Federal Reserve started buying mortgage bonds to help strengthen a housing recovery that began earlier this year. The Fed plans to continue the program until there is substantial improvement in the job market.

Sales of both previously occupied and newly built homes are up from last year. Home prices are rising more consistently. And builders are more confident in the market and are starting to build more homes.

Lower rates are also driving more people to refinance. Mortgage applications surged 16.6 percent last week, the Mortgage Bankers Association reported Wednesday. Of those applications, 83 percent were to refinance existing loans.

Growth in refinancing could help the broader economy. When people refinance their mortgages at lower interest rates, their monthly payments typically decline. That leaves them with more money to spend. Consumer spending drives nearly 70 percent of economic activity.

Still, some economists question whether further decline in rates will make much of a difference. The average rate on the 30-year fixed mortgage has been below 4 percent since early December. Yet home sales remain below healthy levels. And most people who can qualify have likely already taken advantage of the lower rates.

Many people who would like to refinance or buy a home can't because they fail to meet stricter lending requirements or don't have enough money to make a down payment.

To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.

The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year loans was 0.6 point, unchanged from last week. The fee for 15-year loans slipped to 0.5 point from 0.6.

The average rate on one-year adjustable-rate mortgages fell to 2.57 percent from 2.60 percent. The fee for one-year adjustable rate loans held steady at 0.4 point.

The average rate on five-year adjustable-rate mortgages rose to 2.72 percent from 2.71 percent. The fee remained at 0.6 point.

Copyright 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 70 134 16,547
MORTGAGES 72 144 21,576
FORECLOSURE NOTICES 9 35 4,301
BUILDING PERMITS 209 209 39,587
BANKRUPTCIES 80 149 15,691
BUSINESS LICENSES 15 28 5,519
UTILITY CONNECTIONS 117 201 23,774
MARRIAGE LICENSES 14 51 5,086

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