Mortgage rates sink to their lowest levels of the year

Mortgage rates sank to their lowest levels of the year this week but remain well above where they were six months ago.

According to the latest data released Thursday by Freddie Mac, the 30-year fixed-rate average dropped to 3.95 percent with an average 0.5 point. (Points are fees paid to a lender equal to 1 percent of the loan amount.) It was 4.02 percent a week ago and 3.64 percent a year ago.

It is only the second time this year the 30-year fixed rate has dipped below 4 percent.

The 15-year fixed-rate average fell to 3.19 percent with an average 0.5 point. It was 3.27 percent a week ago and 2.89 percent a year ago.

The five-year adjustable rate average tumbled to 3.07 percent with an average 0.4 point. It was 3.13 percent a week ago and 2.87 percent a year ago.

'The long-term trend toward higher interest rates will reassert itself,” said Holden Lewis, assistant managing editor at Bankrate.com. 'The Federal Reserve will continue to raise short-term rates, and in December, it will start shrinking its balance sheet. That will send mortgage rates higher, sooner or later.”

Meanwhile, falling rates drove applications higher last week as homeowners rushed to refinance. According to the latest data from the Mortgage Bankers Association the market composite index - a measure of total loan application volume - increased 4.4 percent.

The refinance share of mortgage activity accounted for 43.9 percent of all applications.