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Dropping mortgage rates increase housing affordability

Low mortgage rates have made moving into a new home more affordable.

Low mortgage rates have made moving into a new home more affordable.

Continually falling mortgage rates have made moving into a home more of a possibility for many moving families.

According to the latest survey from Freddie Mac, the average interest rate on a 30-year fixed-rate mortgage dropped to 4.27 percent, breaking the all-time low of 4.32 that was tied the previous week. Twelve months earlier, a 30-year loan carried a 4.87 percent interest rate.

"Housing affordability increased for the second month in a row in August to tie April's level," said Frank Nothaft, vice president and chief economist at Freddie Mac. "As a result, pending existing home sales also rose for the second consecutive month in August to the strongest pace in four months."

In addition, Freddie Mac reported that interest rates on 15-year FRMs and 5-year adjustable-rate loans also dropped to new lows.

Those low interest rates are also available to a large swath of potential borrowers. A recent report by Zillow.com found that a FICO credit score of 720 - something 47 percent of Americans have - would generally guarantee the lowest available rates, while families with scores as low as 620 could still expect to get a rate of roughly 4.9 percent.