Weak economic conditions, as borne out by recent indicators, caused mortgage rates to drop this week, with the 30-year fixed-rate mortgage falling to its lowest level since September 2005, Freddie Mac reported on Thursday.
The recent movement in rates has inspired more homeowners to refinance their mortgages in recent weeks, said Frank Nothaft, chief economist at McLean, Va.-based Freddie Mac (FRE).
The rate on a 30-year mortgage averaged 5.87%, down from 6.07% last week, according to Freddie Mac's weekly survey. The 30-year's average rate was 6.21% a year ago.
The 15-year fixed-rate mortgage averaged 5.43%, down from 5.68% last week and from 5.96% a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.63%, down from last week's 5.78% average. The five-year ARM averaged 6.03% a year ago.
And one-year Treasury-indexed ARMs averaged 5.37%, down from 5.47% last week. The one-year ARM averaged 5.44% a year ago.
To obtain the rates, the 30- and 15-year fixed-rate mortgages, as well as the 1-year ARM, required payment of an average 0.4 point, while the five-year ARM required payment of an average 0.5 point. A point is 1% of the mortgage amount, charged as prepaid interest.
Mortgage rates fell this week after the latest employment report showed that the economy added 18,000 jobs in December, reflecting the smallest gain since August 2003, Nothaft said.