Average US rate on 30-year mortgage slips to 3.97 per cent; 15-year loan down to 3.18 per cent

WASHINGTON – Average long-term U.S. mortgage rates edged slightly lower this week after two straight weeks of sharp increases. Expectations persist that the Federal Reserve may soon raise its key short-term interest rate.

Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage slipped to 3.97 per cent from 3.98 per cent a week earlier. The key 30-year rate was close to its level of a year ago, 3.99 per cent.

The rate on 15-year fixed-rate mortgages declined to 3.18 per cent from 3.20 per cent.

While it kept the key rate at a record low near zero, the Fed recently signalled the possibility that a rate hike could come at its next meeting in December. Fed officials believed last month that the economic conditions needed to trigger the first interest rate hike in nearly a decade could “well be met” by that time, minutes of their October discussions released Wednesday showed.

The yield on the 10-year Treasury bond, which mortgage rates have been tracking, dropped to 2.27 per cent Wednesday from 2.34 per cent a week earlier. The decline followed recent weeks of soaring yields on U.S. government bonds, which move in the opposite direction of the bonds’ prices. The yield was at 2.24 per cent Thursday morning.

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 was unchanged from last week at 0.6 point. The fee for a 15-year loan declined to 0.5 point from 0.6 point.

The average rate on five-year adjustable-rate mortgages dipped to 2.98 per cent from 3.03 per cent; the fee rose to 0.5 point from 0.4 point. The average rate on one-year ARMs edged down to 2.64 per cent from 2.65 per cent; the fee increased to 0.3 point from 0.2 point.