Mortgage rates sink to 2014 low

Average U.S. rates on fixed mortgages fell this week for a second straight week as the spring home-buying season has gotten off to a slow start.

Mortgage buyer Freddie Mac said Thursday the average rate for the 30-year loan declined to 4.21 percent from 4.29 percent last week. The average for the 15-year mortgage eased to 3.32 percent from 3.38 percent.

Rates have not been this low since the week of Nov. 7, when they were at 4.16 percent.

Mortgage rates have risen almost a full percentage point since hitting record lows about a year ago.

Warmer weather has yet to boost home-buying as it normally does. Rising prices and higher rates have made affordability a problem for would-be buyers, while many homeowners are reluctant to list their properties for sale.

Roughly a third of homeowners owe more on their mortgage than they could recoup from a sale.

Data released Tuesday showed that U.S. home prices rose at a slightly slower pace in the 12 months that ended in March, a sign that weak sales have begun to restrain the housing market's sharp price gains. Real-estate data provider CoreLogic said prices rose 11.1 percent in March compared with March 2013. Though a sizable increase, that was down a bit from February's 12.2 percent year-over-year increase.

Home sales and construction have faltered since last fall, slowing the economy. A harsh winter, higher buying costs and a limited supply of available homes have discouraged many potential buyers. Existing-home sales in March reached their lowest level in 20 months.

Some signs suggest that buying might be picking up a bit as the spring season gets underway. Signed contracts to buy homes rose in March for the first time in nine months, the National Association of Realtors said last week.

The increase in mortgage rates over the year was driven by speculation that the Federal Reserve would reduce its $85 billion-a-month bond purchases, which have helped keep long-term interest rates low. Indeed, the Fed has announced four $10 billion declines in its monthly bond purchases since December.

The latest came last week as Fed officials decided to reduce the monthly purchases to $45 billion a month, because they believe the economy is steadily healing. However, the central bank expects its benchmark short-term rate to remain unusually low.

Fed Chair Janet Yellen told Congress this week that the economy is improving but noted that the job market remains "far from satisfactory" and inflation is still below the Fed's target rate.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country between Monday and Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage declined to 0.6 point from 0.7 point a week earlier. The fee for a 15-year loan remained at 0.6 point.

The average rate on a one-year adjustable-rate mortgage fell to 2.43 percent from 2.45 percent. The average fee slipped to 0.4 point from 0.5 point.

The average rate on a five-year adjustable mortgage was unchanged at 3.05 percent. The fee rose to 0.5 point from 0.4 point.