Average US rate on 30-year mortgages falls to 3.86 per cent; 15-year loan down to 3.08 per cent

WASHINGTON – Average long-term U.S. mortgage rates declined this week following the Federal Reserve’s decision to keep interest rates at record lows for now.

Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage fell to 3.86 per cent from 3.91 per cent a week earlier. The rate on 15-year fixed-rate mortgages eased to 3.08 per cent from 3.11 per cent.

Rates have stayed below 4 per cent for nine straight weeks.

Fed policymakers announced last Thursday they had decided to keep a key short-term interest rate close to zero in the face of threats from a weak global economy, persistently low inflation and unstable financial markets. But Fed Chair Janet Yellen said a rate hike was still likely this year. A majority of Fed officials on the committee that sets the federal funds rate — which controls the interest which banks charge each other — still foresee higher rates before next year. The Fed will meet next in October and then December.

A rate hike by the Fed could bring higher rates for home loans. The Fed has kept the federal funds rate near zero since the financial crisis struck seven years ago.

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 rose to 0.7 point from 0.6 point last week. The fee for a 15-year loan was unchanged at 0.6 point.

The average rate on five-year adjustable-rate mortgages declined to 2.91 per cent from 2.92 per cent; the fee held steady at 0.5 point. The average rate on one-year ARMs fell to 2.53 per cent from 2.56 per cent; the fee remained at 0.2 point.