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Mortgage rates fall below 4%

Anita Balakrishnan
USA TODAY

Thirty-year fixed mortgage rates averaged 3.98% for the week, dropping six basis points after a roller coaster of financial and economic news on China, the Federal Reserve and the housing market.

Freddie Mac, the mortgage company, releases weekly mortgage rates.

That's according to the Primary Mortgage Market Survey, released Thursday by the Federal Home Loan Mortgage Corp., or Freddie Mac, a government-sponsored enterprise that purchases and securitizes home loans.

The report marks the first time the average has ducked below 4% since early June, after trending low for the first half of 2015. The continuing low rates suggest loans will stay at historically, relatively inexpensive levels for at least the immediate future.

The survey showed mortgage rates sinking across the board:

  • 15-year fixed rate mortgage rates were at 3.17 %, down from 3.21% last week and 3.23% a year ago. 
  • 5-year Treasury-indexed, adjustable rate mortgage rates were at 2.95%, down from 2.97% last week and 3.01% a year ago.    
  • 1-year Treasury-indexed, adjustable rate mortgage rates were at 2.52%, down from 2.54%. Rates were at 2.38% in the year-ago period. 

The weekly survey of 125 lenders, and their rates on their most popular mortgages, is a closely followed barometer of housing trends. Rates have been at historical lows in recent years, having rarely dipped below 5% until early 2009.

The drop-off this comes after a volatile week in the Chinese stock market, uncertainty around the Federal Reserve's interest rate plan, and a disappointing week in the housing market, said Sean Becketti, the chief economist at Freddie Mac.

Becketti said Monday's 8% decline in Chinese stock prices triggered similar dives in Treasury Bills and mortgage rates.

And while existing home sales hit record highs just last week, said the National Association of Realtors, home prices fell 0.7 points short of expectations, according to the S&P/Case-Shiller Home Price Index, released Tuesday.

"Coming into this week, existing home sales for June ... suggested a stronger tone in the housing market," Becketti said." However this week brought nothing but bad — or at least weaker-than-expected — news."

The Federal Reserve is set to raise interest rates when it sees some improvement in the economy, particularly the labor market, they said Wednesday. But the timeline remains vague, leaving 30-year-mortgage rates — which are highly correlated with Treasury bond rates and monetary policy — in the balance.

"With no clear direction coming from the Fed this afternoon, we expect more of the same in coming weeks," Becketti said.

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