WASHINGTON -- Average rates on U.S. fixed mortgages declined this week as concern waned in the financial markets over the Federal Reserve's possible slowing of its bond purchases this year.

Mortgage buyer Freddie Mac said Thursday the average on the 30-year loan slipped to 4.37 percent. That's down from 4.51 percent last week but is still near the highest level in nearly two years.

Just two months ago the rate was 3.35 percent, barely above the record low of 3.31 percent. Rates had surged in recent weeks amid concern over the Fed's bond purchases, which have kept interest rates low.

The average on the 15-year mortgage fell to 3.41 percent from 3.53 percent last week.

Chairman Ben Bernanke said last week the Fed will continue to stimulate the economy, even after it begins to slow the bond purchases.

Even with the recent gains, mortgage rates remain low by historical standards. Low rates have helped fuel a housing recovery that is helping to drive economic growth this year.

Greater demand, along with a tight supply of homes for sale, has pushed up home prices. It also has led to more home construction, which has created more jobs.

The Commerce Department reported Wednesday that U.S. builders started work on fewer homes in June, mostly because apartment construction fell sharply. But applications for permits to build single-family houses rose to the highest level in five years, suggesting the housing recovery will continue. 

The yield on the 10-year Treasury note, which mortgage rates typically track, fell Wednesday to 2.49 percent from 2.53 percent as investors bought U.S. government bonds following comments by Bernanke in his appearance before a U.S. House committee. He said the central bank had no firm timetable for cutting back on its bond purchases. The Fed would consider reducing its stimulus program if the economy improves, Bernanke said, but he stressed that the reductions were "by no means on a preset course."

The yield on the 10-year note edged up to 2.52 percent Thursday morning.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through 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 was 0.7 point this week, down from 0.8 point last week. The fee for a 15-year loan also slipped to 0.7 point from 0.8 point.
• The average rate on a one-year adjustable-rate mortgage was unchanged at 2.66 percent. The fee declined to 0.4 point from 0.5.
• The average rate on a five-year adjustable mortgage fell to 3.17 percent from 3.26 percent. The fee eased to 0.6 point from 0.7.

http://www.dailyfinance.com/2013/07/18/fixed-mortgage-rate-falls-freddie-mac/