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Mortgage rates inch downward at year's end

Polyana da Costa

Mortgage rates don't seem poised to start the new year at record lows, but they'll be close enough to the bottom.

30 year fixed rate mortgage – 3 month trend

30 year fixed rate mortgage – 3 month trend

The benchmark 30-year fixed-rate mortgage fell to 3.59 percent from 3.62 percent, according to the national survey of large lenders. The mortgages in this week's survey had an average total of 0.34 discount and origination points. One year ago, the mortgage index stood at 4.21 percent; four weeks ago, it was 3.52 percent.

The benchmark 15-year fixed-rate mortgage fell to 2.87 percent from 2.89 percent. The benchmark 5/1 adjustable-rate mortgage fell to 2.77 percent from 2.78 percent.

Mortgage rates reached record lows numerous times in 2012. The 30-year fixed, which fell below 4 percent for the first time in mid-May, averaged 3.88 percent in 2012. The average for the 5/1 ARM was 2.92 percent.

Will borrowers continue to enjoy the low-rate environment in 2013? It depends on your definition of low.

"Who knows if we'll hit new all-time lows? But they should be low enough to keep (refinances) and purchases humming along," says John Stearns, a mortgage banker at American Fidelity Mortgage Services in Mequon, Wis.

Weekly national mortgage survey

Results of's Dec. 26, 2012, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

30-year fixed 15-year fixed 5-year ARM
This week's rate: 3.59% 2.87% 2.77%
Change from last week: -0.03 -0.02 -0.01
Monthly payment: $749.24 $1,129.17 $675.35
Change from last week: -$2.78 -$1.58 -$0.87

A forecast by the Mortgage Bankers Association estimates the 30-year fixed rate will stay below 4 percent at least through the first half of the new year.

"We may see a spike upward in rates if the 'fiscal cliff' is avoided before the end of the year," Stearns says. "I expect that to be short-lived, however. The (Federal Reserve) buying and the euro crisis will keep rates low."

The Fed is expected to continue to spend billions per month on purchases of mortgage and Treasury bonds to help rates stay low.

The low rates have been crucial help for the recovering housing market. Home prices rose 4.3 percent in October compared to a year ago, according to the closely watched Case-Shiller home-price index released Wednesday.

The index of 20 major cities dropped 0.1 percent in October from a month earlier, but the fall was expected because prices are usually lower in autumn and winter.

"Looking over this report, and considering other data on housing starts and sales, it is clear that the housing recovery is gathering strength," says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. "Higher year-over-year price gains plus strong performances in the Southwest and California, regions that suffered during the housing bust, confirm that housing is now contributing to the economy."

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