Mortgage rates drop in housing slump

WASHINGTON, Aug. 26 (UPI) -- Average interest rates for long-term mortgages followed Treasury bond yields lower last week, the U.S. Federal Home Loan Mortgage Corp. said Thursday.

Lower yields on Treasury bonds helped mortgage interest rates for 15-year and 30-year contracts set record lows, as rates fell for the ninth week out of the past 10, the government-sponsored mortgage broker said.

"Existing home sales plunged 27 percent in July, while (sales of) new homes fell 12 percent to a new all-time record low, which led to some market concerns that the housing market may slow the economic recovery," Freddie Mac Deputy Chief Economist Amy Crews Cutts said.

"As a result, long-term bond yields fell to the lowest levels since January 2009, allowing the fixed mortgage rates to ease to new record lows," she said.

In the latest weekly survey, Freddie Mac said interest rates for 30-year, fixed-rate contracts dropped from 4.42 percent with an average of 0.7 points, to 4.36 percent, a 39-year low.

Average interest rates for 15-year, fixed-rate mortgages fell from 3.9 percent to 3.86 percent. Points for 15-year mortgages averaged 0.6 during the week.