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Mortgage Rates Sail Lower

The average traditional 30-year fixed mortgage cost just 4.19% this week, on average, according to Freddie Mac.



) -- Mortgage rates continued to fall this week, as the housing market began to feel the impact of bank foreclosure freezes.

Freddie Mac's


weekly mortgage survey showed that the typical mortgage rate hit another all-time low. Traditional, 30-year fixed mortgages dropped to 4.19%, down sharply from last week's 4.27% level. A year ago, those rates were hovering near 5%; they've stayed below that level for nearly six months.

Other fixed rate mortgages with a 15-year duration hit an all-time low of 3.62%, down from 3.72% a week ago. Five-year adjustable rate mortgages remained stable at another all-time low of 3.47%, while one-year ARMs rose slightly to 3.43% from 3.40%.

>>>Which mortgage is better for me?

Mortgage rates have been dropping fairly steadily as federal regulators have reiterated their stance of keeping benchmark rates low for an "extended period" of time. Meanwhile, the housing market is struggling to find a bottom as distressed borrowers remain a drag on prices and sales.

In recent weeks, major servicers have placed a temporary dam in front of the flood of foreclosure filings due to the practice of "robosigning." Regulators and attorneys general have targeted big lenders like

Bank of America

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JPMorgan Chase

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, GMAC and

Wells Fargo

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, as they investigate whether bank employees signed thousands of foreclosure documents without verifying information properly. Some major servicers have put temporary freezes in place as they review documents and processes to correct potential issues.

>>>Should I refinance?

Frank Nothaft, vice president and chief economist of Freddie Mac, noted that the low rate environment has also "spurred yet another refinancing wave," with refinancing applications jumping 24% last week. Nothaft pointed out that during the second quarter, the average borrower had an effective mortgage rate of 6.07%.

"By refinancing into this week's 30-year fixed-rate mortgage, the average homeowner could save over $230 a month in principal and interest payments on a $200,000 loan balance," he said.

-- Written by Lauren Tara LaCapra in New York


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