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30-year mortgages fall to 4.31%

– Average rates on U.S. fixed mortgages fell for the second straight week, a welcome sign for homebuyers hoping to lock in lower rates that had spiked earlier this month.

Mortgage buyer Freddie Mac said Thursday that the average rate on 30-year loans fell to 4.31 percent. That’s down from 4.37 percent the previous week but nearly a full percentage point higher than in early May. The rate reached a two-year high of 4.51 percent three weeks ago.

The average rate on 15-year fixed loans declined to 3.39 percent, down from 3.41 percent a week earlier.

While rates remain low by historical standards, they have risen in recent weeks after the Federal Reserve indicated it might slow its bond purchases later this year. The $85 million-a-month in bond purchases have kept long-term interest rates low, encouraging more borrowing and spending.

Mortgage rates tend to follow the yield on the 10-year Treasury note, which rose sharply after Chairman Ben Bernanke said the Fed might reduce its bond-buying program.

But the yield has since stabilized after Bernanke and other members emphasized that any change in the bond purchases would be tied to the economy’s health – not a calendar date. And Bernanke said the Fed would likely continue other low-interest rate policies for the foreseeable future because unemployment remains high and inflation low.

Low mortgage rates have contributed to a housing recovery that has helped 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.

Last week the government said U.S. sales of new homes rose 8.3 percent to a seasonally adjusted annual rate of 497,000, the highest since May 2008.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country 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.

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