Home Buyers See Mortgage Rates Plunge Below 6%

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On top of the recently enacted $7,500 tax credit, first-time home buyers received a further boost last week in their efforts to buy a home from a sharp drop in mortgage rates resulting from the recent government takeover of Fannie Mae and Freddie Mac.

The interest-rate decline was also good news for those seeking refinancing as well as the housing market overall.

The 30-year fixed-rate mortgage averaged 5.93% for the week ending on Thursday, Sept. 11, according to Freddie Mac’s Primary Mortgage Market Survey. That was down from 6.35% the previous week and 6.31% a year earlier.

One-year Treasury-indexed adjustable-rate mortgages edged up slightly, to 5.21% from an average of 5.15% for the previous week.

“Interest rates for 30-year fixed-rate mortgages are down almost 0.6 percentage points over the past four weeks, which will help to spur home purchases and loan refinancing in coming weeks,” said Frank Nothaft, Freddie Mac’s chief economist. “This means that the monthly principal and interest payment on a new $200,000 loan is over $76 lower than a month ago,” he said.

“Lower rates have occurred at an opportune time, as the July pending sales data from the National Association of Realtors® were off 3.2% from June,” Nothaft said. “The Mortgage Bankers Association reported that refinance applications are up 18% over the past three weeks through September 5th, indicating that refinance activity has already begun to pick up.”

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