Mortgage Rates Hover At Lowest Levels of the Year

Mortgage rates hovered at their lowest levels of the year for the third straight week this week, according to a survey published Thursday by Freddie Mac FMCC +0.57%.

The average 30-year fixed-rate mortgage stood at 4.1% for the week ending Wednesday, according to Freddie’s survey. To get that rate, borrowers had to pay fees equal to around 0.5% of the loan amount.

Mortgage rates have drifted down in recent weeks as bond yields on 10-year Treasury notes have fallen. Investors have bought government debt amid rising concerns over geopolitical instability.

Few expected rates would be this low at the beginning of the year. Indeed, one of the biggest surprises of 2013 came in the spring, when mortgage rates jumped suddenly as anxious investors sold off Treasury securities amid signs that the Federal Reserve was thinking about slowing down its bond-buying program.

By contrast, one of the bigger surprises of 2014 may be that mortgage rates might end the year lower than they began, at around 4.5%, even as the Federal Reserve has gradually pared back its purchases of mortgage-backed securities.

One reason the taper has had less of an impact than some feared: big declines in refinancing last year reduced the overall issuance of mortgage bonds. This meant that the Fed was still accounting for a high share of mortgage-bond purchases, even as it reduced the overall volume of those purchases.

Mortgage refinancing has largely subsided because even though mortgage rates are at their lowest levels of the year, they’re still higher than they were for all of 2012 and the first half of 2013, when the 30-year fixed-rate mortgage fell to as low as 3.3%.

Lower mortgage rates have probably helped housing sales at the margins, by reducing the monthly cost of home purchases, but they’re one of many factors that goes into the home-purchasing equation.