WASHINGTON (AP) — After nine straight weeks of increases, long-term US mortgage rates fell this week.
Mortgage buyer Freddie Mac said Thursday the rate on 30-year fixed-rate loans declined to an average 4.20 percent from 4.32 percent last week. That was still sharply higher than a 30-year rate that averaged 3.65 percent for all of 2016, the lowest level recorded from records going back to 1971. A year ago, the benchmark rate stood at 3.97 percent.
The average for a 15-year mortgage eased to 3.44 percent from 3.55 percent last week.
Mortgage rates surged in the weeks since the election of Donald Trump in early November. Investors in Treasury bonds bid yield rates higher because they believe the president-elect's plans for tax cuts and higher spending on roads, bridges and airports will drive up economic growth and inflation.
That would depress prices of long-term Treasury bonds because inflation would erode their value over time, a prospect that caused investors to demand higher yields. The wave of selling in the bond market lifted bond yields, which move opposite to prices and influence long-term mortgage rates. Yields reached their highest levels in more than two years.
This week, bond prices recovered and the yield on the benchmark 10-year Treasury bond fell to 2.44 percent Wednesday from 2.51 percent a week earlier. That compares with 1.87 percent on Election Day Nov. 8. The yield declined further to 2.42 percent Thursday morning.
The sustained climb in mortgage rates caused fewer consumers to come forward to buy a home. Applications for mortgage loans dropped 12 percent in the week ended Dec. 30 from two weeks earlier, according to the Mortgage Bankers Association. Applications to refinance mortgages dropped 22 percent.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday 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 percent of the loan amount.
The average fee for a 30-year mortgage was unchanged this week at 0.5 point. The fee on 15-year loans also remained at 0.5 point.
Rates on adjustable five-year loans rose to 3.33 percent from 3.30 percent. The fee fell to 0.4 point from 0.5 point.