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Jittery Markets Send Mortgage Rates to 50-Year Lows

Mortgage rates slammed into a 50-plus-year low Thursday, reflecting continuing concerns over European sovereign debt crises, the potential for defaults overseas, and an overall economic slowdown. Mortgage giant ""Freddie Mac"":http://www.freddiemac.com/ posted a 4.15-percent average for 30-year fixed-rate loans, racing past the record 4.17-percent drop it registered in 2010. Citing the same reasons for new lows, ""Bankrate"":http://www.bankrate.com/ followed suit by revealing declines in fixed-rate mortgages for a third straight week.

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Freddie's ""Primary Mortgage Market Survey"":http://freddiemac.mediaroom.com/index.php?s=12329&item=51053, a measurement tool gauging fixed- and adjustable-rate mortgages (ARMs), showed the benchmark 30-year loan settling at the breathtaking low this week, falling beneath 4.32 percent from last week and 4.42 percent recorded at the same time last year. Meanwhile, the 15-year fixed-rate mortgage hovered at 3.36 percent, according to the GSE, below a 3.50 percent from last week and a 3.90-percent average from one year ago.

For Bankrate, the widely followed fixed-rate loans followed the same lows. According to a ""weekly survey"":http://phx.corporate-ir.net/phoenix.zhtml?c=61502&p=irol-newsArticle&ID=1597795&highlight released by the mortgage company, the 30-year fell to 4.45 percent, averaging 0.45 percent in discount and origination points, just shy of the 4.42-percent record average set over October and November 2010. The 15-year tracked a 3.58-percent average, dishing on rates for the same loan.

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Commenting on Freddie's survey, Frank Nothaft, VP and chief economist, said that the ""Federal Reserve's policy statement last week and ongoing market concerns over the European debt market carried momentum into this week allowing all mortgage products in our survey to reach all-time record lows. For instance, 30-year fixed mortgage rates are now the lowest in over 50 years. In comparison, the Bureau of Economic Analysis estimated the average effective mortgage rate was about 5.3 percent on single-family loans outstanding during the second quarter of 2011.""

He added that unsurprisingly, ""many homeowners took advantage of this low mortgage rate environment and have already refinanced their loans. The refinance share of applications averaged nearly 70 percent of all mortgage activity in the first half of this year, according to our survey.

""In addition, an increasing share of refinancing borrowers chose to shorten their loan terms during the second quarter, according to Freddie Mac's Quarterly Product Transition Report,"" he said.

For the GSE, 5-year Treasury-indexed ARMs plunged from 3.13 percent to 3.08 percent this week, averaging 0.5 percent, just below 3.56 percent for the ARM.

Similarly, the one-year Treasury-indexed ARM rounded out at 2.86 percent at an average 0.6 points, below the 2.89-percent average from last week.

Bankrate recorded declines to 3.15 percent and 3.83 percent for 5-year and 10-year ARMs, respectively.

The weekly survey by the mortgage company ascribed the falling numbers to ""weakness in the U.S. economy and the accompanying demand for Treasury securities,"" which ""pushed mortgage rates lower"" as investors rushed to buy up safer-looking U.S. bonds.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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