WASHINGTON (AP) — Average rates on fixed mortgages fell sharply this week and moved closer to historic lows, keeping home-buying and refinancing attractive.
Mortgage buyer Freddie Mac said Thursday that the average rate for 30-year fixed loans fell to 3.43% from 3.54% last week. That's near the 3.31% reached in November, which was the lowest on records dating to 1971.
The average rate on 15-year fixed mortgages dipped to 2.65% from 2.74% last week. That's slightly above the record low of 2.63%, also reached in November.
Low mortgage rates are helping sustain a housing recovery that began last year. Home sales and residential construction are up, prices are rising and more Americans are refinancing. That's helped the broader economy.
Mortgage rates have been low because they tend to track the yield on 10-year Treasury notes. The yield has fallen in recent weeks and went as low as 1.71% April 5, after a weak report on March hiring drove investors to seek the safety of a U.S. Treasury bonds. When demand rises, bond yields fall.
On Thursday, the yield was up to 1.79%, still low by historical standards.
It's time to buy!
CHICAGO, March 11, 2013 /PRNewswire/ -- Good news for homebuyers: the time to snag a great deal is now. After seven years of falling home prices, most economists say the Chicago market has finally hit bottom. But not all great deals are great buys. If you want a property that will increase in value, you need to be sure to buy a home that has strong fundamentals and not just the biggest markdown. Chicago magazine's real estate expert, Dennis Rodkin, pored through Chicagoland housing data and property listings to compile Where to Buy Now, an authoritative, highly practical guide to the 21 best-value neighborhoods and suburbs for buyers in every stage of life-whether you are a first-time buyer, move-up buyer, downsizer, or pied-a-terre seeker. Plus: The latest home price data for 273 local communities that both buyers and sellers can use, and how the Chicagomarket compares nationally.
The issue, on newsstands Thursday, also features The Yes Men. When Richard M. Daley left office, several aldermen proclaimed it would be the beginning of a new era-no more unanimous budget votes or disastrous parking meter deals. Rahm Emanuel even said he too wanted a strong City Council that wouldn't just bend to his agenda. But nearly two years after Mayor Emanuel came into office, aldermen are still rubber-stamping everything he wants. Why can't they say no? And why should this trouble Chicagoans?
Also in the April issue of Chicago magazine:
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Chicago Tribune Media Group publishes the Pulitzer Prize-winning Chicago Tribune as well as related print and interactive media serving Chicagoland such as RedEye, Hoy, Triblocal, TheMash, chicagotribune.com, triblocal.com, and metromix.com.
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By AMY HOAK And MIA LAMAR
Even as mortgage rates begin to rise, the difference between conforming and jumbo loan rates is shrinking, and that is good news for buyers of higher-priced homes.
Conforming loans are largely financed by Fannie Mae and Freddie Mac, and are valued at up to $417,000 — although they can be as high as $625,000 in some of the nation's pricier markets.
Jumbo loans are anything above that and are funded by banks or private investors. Rates used to be far higher for jumbo loans, but that is changing fast.
(Read More: Housing Jobs Jump, but Workers Aren't Coming Back)
The spread between a jumbo and a conforming mortgage rate was as wide as 0.875 percent last summer. It is between 0 and 0.25 percent as of Monday. Last week, the Mortgage Bankers Association reported the average rate on the 30-year fixed conforming mortgage was at 3.70 percent and the average rate on the 30-year fixed jumbo rate was at 3.80 percent.
"The jumbo market has heated up, as tight lending guidelines have drastically reduced consumer late payments, strategic defaults, and foreclosures," wrote Julian Hebron, a mortgage banker in California and author of the blog The Basis Point. "This gives investors confidence to buy jumbos again, which means lower rates for consumer borrowers. These borrowers can count on lending guidelines remaining tight, but all that means is a bit more paperwork when getting a loan."
(Read More: Housing Recovery Leaves Some Behind)
The jumbo securitization market is tiny, however, as most jumbo loans are still held on bank balance sheets. There are so far just two players in jumbo securitizations,Redwood Trust Inc. and very recently Credit Suisse Group AG, although others, including JPMorgan Chase, are preparing to join them.
There were no jumbo securitizations at all between 2008 and 2010. When Redwood dipped its toes in, securitizations totaled less than $1 billion in 2010-2011. By 2012 they hit $3.5 billion, according to Inside Mortgage Finance, and are already at $2 billion so far for 2013. Hebron believes they could surge dramatically in the very near future.
The rebirth of jumbo securitizations is being driven not just by investor confidence, but by growth in jumbo originations, which increased after the conforming loan limit was lowered. Originations of non-agency jumbo mortgages jumped by over 19 percent in 2012 from 2011, according to Inside Mortgage Finance.
So why is the conforming-jumbo spread shrinking? Not because jumbo rates are falling but because conforming rates are rising due in part to government intervention.
"Congress keeps raiding the guarantee fees (g-fees) Fannie and Freddie charge lenders in the securitization process for other purposes, like funding payroll tax cuts," noted Hebron. "For each 10 basis point hike in g-fees, we've seen consumer rates rise about 0.125 percent.
While jumbo loans often have even tighter guidelines than conforming, they are certainly obtainable and will likely get even cheaper as investors find them more palatable. That is good news for the higher-priced housing market, which had been cash-strapped and cold due to lack of credit.
(Read More: Here's What Is Fueling the Housing Boom in Vegas)
It is now coming back with a vengeance.
Sales of homes priced over $750,000 were up 39 percent in January, according to the National Association of Realtors.
—By CNBC's Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook atfacebook.com/DianaOlickCNBC
Questions? Comments? RealtyCheck@cnbc.com