Mortgage interest rates this week slipped to their lowest level in three years, adding fuel to an already sizzling spring housing market.
The average rate on a 30-year fixed-rate mortgage during the past week was 3.57 percent, according to a survey by Freddie Mac. That's down from the previous week when it averaged 3.61 percent and a year ago when it was 3.85 percent.
It was also the third weekly decline in a row and a surprise for economists who had expected a slow, steady increase during the year.
The latest decline followed a disappointing April U.S. employment report and other unsettling global economic news, sending investors to the safety of long-term bonds that directly influence mortgage rates.
"It's not surprising considering some of the global economic concerns in China and Europe," said Peter Lindquist, a senior mortgage loan officer with Wintrust Mortgage in Oakdale. "Generally speaking, when economic growth slows, it often follows with improved mortgage rates."
In addition, the Federal Reserve's decision not to increase the benchmark interest rate — which it had raised from record lows in December, has caused government bond prices to remain relatively high, while yields have fallen. Bond yields fall when prices rise; mortgage rates tend to follow yields. By midweek, the yield on the 10-year Treasury bond was 1.73 percent, a slight decline from the previous week.
Sean Becketti, chief economist for Freddie Mac said in a statement that mortgage rates have fallen in 14 of the previous 19 weeks. "Disappointing April employment data once again kept a lid on Treasury yields, which have struggled to stay above 1.8 percent since late March," he said.
The declines come in the most robust housing market in a decade in the Twin Cities. With sales outpacing listings in some parts of the metro, house prices are on the rise. And while sales have risen, they are being constrained by a shortage of house listings, especially starter houses in Minneapolis, St. Paul and their first-ring suburbs.
