Rates for 30-year U.S. mortgages declined to a record low for the second straight week, extending a drop in borrowing costs after applications for home loans jumped to a three-year high.
The average rate for a 30-year fixed loan fell to 3.36 percent in the week ended today from 3.4 percent, McLean, Virginia-based Freddie Mac said in a statement. It was the lowest in data going back to 1971. The average 15-year rate dropped to 2.69 percent, also a record, from 2.73 percent.
Rates have declined since the Federal Reserve's September announcement that it would buy $40 billion of mortgage-backed securities a month to help support the housing market and stimulate the economy. Home-loan applications climbed 16.6 percent in the week ended Sept. 28 to the highest level since April 2009, according to the Mortgage Bankers Association. An index measuring refinancing surged 19.6 percent, while the purchase gauge gained 3.9 percent, the Washington-based group said yesterday.
"Applications for home purchase remain very low by historic standards," Paul Diggle, property economist for London-based Capital Economics Ltd., wrote in a note to clients yesterday. "And with mortgage lending criteria as strict as ever, many mortgage applicants may still find themselves being turned down."
Contracts to buy previously owned homes dropped 2.6 percent in August after a revised 2.6 percent gain in July that was more than initially reported, the National Association of Realtors said last week.
Low borrowing costs are spurring mortgage prepayments, which have soared to the highest level in seven years. Loans were repaid in August at a pace that would erase 25 percent of the debt in a year, according to Lender Processing Services Inc., a Jacksonville, Florida-based data provider that tracks 40 million mortgages.