WASHINGTON – Long-term U.S. mortgage rates fell this week after three straight weeks of increases. The drop followed a surprisingly weak employment report that deepened doubts about the economy.
Mortgage buyer Freddie Mac said Thursday the average 30-year fixed-rate mortgage slipped to 3.60 per cent from 3.66 per cent last week. That is well below its level a year ago of 4.04 per cent.
The average rate on 15-year fixed-rate mortgages declined to 2.87 per cent from 2.92 per cent.
The government reported Friday that hiring in May slowed to a near-standstill. While unemployment slid from 5 per cent to 4.7 per cent, the lowest since November 2007, the rate fell for a troubling reason: Nearly a half-million jobless Americans stopped looking for work and so were no longer counted as unemployed.
The jobs report raised doubts that the Federal Reserve will increase short-term interest rates at its meeting next week or perhaps even at its subsequent meeting in July. Rates have hovered around zero for seven years and almost everyone had expected the Fed to grow more aggressive this summer.
The report sent investors toward the safety of U.S. government bonds, lifting their prices and reducing long-term bond yields. Mortgage rates often move in sync with long-term bond yields. The yield on the benchmark 10-year Treasury note dropped to 1.70 per cent Wednesday from 1.84 per cent a week earlier. It fell further to 1.67 per cent Thursday morning.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of 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 per cent of the loan amount.
The average fee for a 30-year mortgage was unchanged from last week at 0.5 point. The fee for a 15-year loan also was steady at 0.5 point.
Rates on adjustable five-year mortgages averaged 2.82 per cent this week, down from 2.88 per cent last week. The fee remained at 0.5 per cent.