Bonds News

UPDATE 1-U.S. mortgage rates at new record lows-Freddie Mac

(Adds quotes, background, details from survey)

NEW YORK, Oct 14 (Reuters) - U.S. mortgage rates reached new record lows in the latest week, according to a Freddie Mac survey released on Thursday, as data showing economic weakness fueled demand for safe-haven government debt.

Interest rates on U.S. 30-year fixed-rate mortgages, the most widely used loan, averaged 4.19 percent for the week ended Oct. 14, down from the previous week’s 4.27 percent and the lowest on record, according to the survey that began in 1971.

The 30-year fixed-rate mortgage has been under 5 percent for 23 weeks in row. Rates were also below their year-ago level of 4.92 percent, said Freddie Mac FMCC.OB, the second-largest U.S. mortgage finance company.

While rock-bottom rates offer a glimmer of hope for a housing market struggling to find footing in the aftermath of the expiration of popular home buyer tax credits earlier this year, their impact on demand for home purchase loans has been tepid. A weak jobs market and flailing economy continue to weigh on consumer confidence.

Meanwhile, 15-year fixed-rate mortgages fell to average 3.62 percent from 3.72 percent last week, the lowest since Freddie Mac began surveying this loan type in 1991.

“September’s employment report held no big surprises to financial markets, allowing long-term bond yields and fixed mortgage rates to continue to ease,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

“As a result, both the 30-year and 15-year fixed mortgage rates hit all-time record lows for the third consecutive week,” he said.

Mortgage rates are linked to yields on Treasuries and yields on mortgage-backed securities.

The Mortgage Bankers Association said on Wednesday mortgage applications for home refinancing loans rose for the first time in six weeks, with demand jumping to its highest level since late August. For details double-click on [ID:nNLLCLE6JW].

An increase in refinancing may provide a jolt to the economy as it could portend an increase in consumer spending. By lowering monthly mortgage payments it may also help some homeowners avoid default and foreclosure if their credit is good enough.

Michael Gapen, senior U.S. economist at Barclays Capital in New York, said low mortgage rates have significantly improved affordability, but believes a housing market recovery will be elusive without a stronger labor market.

“The rise in refinancing activity is good for household balance sheets and supportive of housing activity in general,” he said.

“At this point a housing market recovery will largely depend on the ability of the economy to create jobs and support higher incomes for people,” he said.

Freddie Mac said rates on 5/1 ARMs, set at a fixed rate for five years and adjustable in each following year, was 3.47 percent, unchanged from last week, tying the all-time lowest level since Freddie Mac began tracking this loan type in 2005.

One-year adjustable-rate mortgages were 3.43 percent, up from 3.40 percent last week. A year ago, 15-year mortgages averaged 4.37 percent, the one-year ARM was 4.60 percent and the 5/1 ARM 4.38 percent. [ID:nWALELE6OQ]

Editing by Chizu Nomiyama