Down, down, down: 30-year mortgage at 3.76%

WASHINGTON — Average long-term U.S. mortgage rates fell sharply this week amid concern over a labor market that has shown recent signs of weakness.

Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage dropped to 3.76% from 3.85% a week earlier. The rate on 15-year fixed-rate mortgages declined to 2.99% from 3.07%.

Rates have stayed below 4% for 11 straight weeks. This week's decline brought rates to levels far below last year's levels, providing an inducement for potential homebuyers. A year ago, the average 30-year mortgage rate was 4.19%, while the rate for 15-year loans was 3.36%.

The heightened interest among potential purchasers and homeowners looking to refinance was evident in a sharp increase in mortgage applications. Applications jumped 25.5% in the week ended Oct. 2 from the previous week, according to the Mortgage Bankers Association.

A government report issued last Friday showed that U.S. hiring slowed sharply in September, and job gains for July and August were lower than previously thought. That was a sour note for a labor market that had been steadily improving.

The Labor Department said employers added just 142,000 jobs in September, depressed by job cuts by manufacturers and oil drillers. The unemployment rate remained 5.1%, but only because more Americans stopped looking for work and were no longer counted as unemployed. All told, the proportion of Americans who either have a job or are looking for one fell to a 38-year low.

The tepid pace of hiring complicates the picture for the Federal Reserve, which is deciding whether to raise short-term interest rates later this year for the first time in nine years.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of 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% of the loan amount.

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

The average rate on five-year adjustable-rate mortgages fell to 2.88% from 2.91%; the fee was unchanged at 0.4 point. The average rate on one-year ARMs rose to 2.55% from 2.53%; the fee remained at 0.2 point.