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story.lead_photo.caption In this Thursday, Feb. 21, 2019 photo a recently constructed home is surrounded by snow in Natick, Mass. On Thursday, March 28, Freddie Mac reports on this week’s average U.S. mortgage rates. (AP Photo/Steven Senne)

WASHINGTON -- Buying a home is becoming a bit cheaper, thanks mostly to the Federal Reserve's decision last week to put its interest rate increases on hold for now.

Mortgage buyer Freddie Mac said Thursday that the average 30-year fixed rate mortgage plunged to 4.06 percent this week, down from 4.28 percent last week. That's the steepest weekly drop in a decade.

Last week, Fed Chairman Jerome Powell said the U.S. economy faces several headwinds, including slowing global growth, a trade war with China, and fading effects from last year's tax cuts. Fed policymakers signaled they were unlikely to raise rates this year, after December predictions of two increases.

Lower mortgage rates, slowing home price increases and a pickup in the number of available homes appear to be rejuvenating home sales after a slowdown last year.

Sales of existing homes surged 11.8 percent in January, a sign that lower rates were encouraging more people to buy homes. The average 30-year rate reached 4.95 percent in November, following a series of rate increases by the Fed.

Mortgage costs are more directly influenced by the yield on the 10-year Treasury note, which also rose last year as many investors shifted money into stocks. Stock market indexes rose at a healthy pace until last fall.

The yield on the 10-year note has fallen sharply since last year, when it touched 3.21 percent in November. On Thursday it fell to 2.39 percent in mid-day trading.

Potential buyers have rushed to take advantage of the lower borrowing costs. An index measuring applications for mortgage loans jumped 9 percent last week, the Mortgage Bankers Association said.

The refinance share of mortgage activity accounted for 40.4 percent of all applications.

Fewer people signed contracts to buy homes in February compared with the previous month, suggesting home sales will cool off a bit after January's big jump. But economists expect sales will continue to improve this year after last year's slowdown.

The National Association of Realtors reported that its pending home sales index slipped 1 percent to 101.9. That followed a 4.3 percent jump in January, which came after average mortgage rates fell from a recent peak of nearly 5 percent in November.

Pending sales is a measure of home purchases that are usually completed a month or two later.

Hiring has been steady in recent months and average pay growth has accelerated, making a home purchase cheaper.

"With mortgage demand strengthening in the wake of the decline in mortgage rates, we look for better sales in the second quarter," said Ian Shepherson, chief economist at Pantheon Macroeconomics.

Freddie Mac surveys lenders across the country between Monday and Wednesday each week to compile its mortgage rate figures.

The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates.

The average fee on 30-year fixed-rate mortgages ticked up this week to 0.5 point from 0.4 point.

The average 15-year mortgage rate also fell, to 3.57 percent from 3.71 percent. The fee was unchanged at 0.4 point.

The average rate for five-year adjustable-rate mortgages dropped less sharply, to 3.75 percent from 3.84 percent. The fee remained at 0.3 point.

Information for this article was contributed by Kathy Orton of The Washington Post.

Business on 03/29/2019

Print Headline: 30-year mortgages at 4.06% after Fed sits on interest rate

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