Sluggishness in the latest core inflation measure helped ease markets’ fears and brought mortgage rates down, Freddie Mac and Bankrate.com reported today in their weekly surveys.
Freddie Mac reported that the 30-year fixed-rate mortgage fell to an average 6.17 percent from 6.22 percent last week, and the 15-year fixed rate dipped from 5.9 percent to 5.89 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.
Costs on adjustable-rate mortgages (ARMs) eased as well this week, as the five-year Treasury-indexed hybrid ARM sank to an average 5.92 percent from last week’s 5.93 percent and the one-year Treasury-indexed ARM dropped from 5.47 percent to 5.45 percent. Points on these loans averaged 0.6 percent and 0.7 percent, respectively.
“Mortgage rates slipped following the latest reports of moderation in inflation rates from the core producer price and consumer price indexes,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. “Excluding food and energy, the core inflation rate for consumer prices rose 2.5 percent year-over-year, the smallest annual growth since May 2006. This helped calm markets and brought mortgage rates down.
“The low mortgage rates that have prevailed so far in 2007 may have a stabilizing effect on the housing sector. Both housing starts and new permits for March came in above expectations, but February’s housing starts numbers were revised downward. Because of weather-induced fluctuations in housing statistics, we will have to see what the numbers show later in the spring to gauge whether the March readings are indeed a signal of market turnaround.”
In Bankrate.com’s survey of large lenders, fixed mortgage rates broke a string of four consecutive increases, dipping this week in response to favorable news on the inflation front. The average 30-year fixed mortgage rate slid to 6.29 percent, with discount and origination points averaging 0.27.
The average 15-year fixed-rate mortgage, popular for refinancing, inched lower to 6.02 percent, Bankrate.com reported. With larger loans, the average jumbo 30-year fixed rate nosed higher to 6.59 percent, while the average 5/1 ARM sank 6.11 percent and the average one-year ARM held at 6 percent.
Bankrate.com said mortgage rates had increased in each of the four prior weeks, aided by comments from the Fed about the focus on taming inflation. But several inflation readings in the past week served to calm the nerves of investors, and the upward momentum on Treasury yields — to which mortgage rates are closely tied — subsided. Both the Producer Price Index (PPI) and Consumer Price Index (CPI) showed tame advances at the core level that excludes volatile food and energy components, fueling optimism that the Fed won’t need to hike interest rates as a preventative.
Also, the March reading on capacity utilization, cited by the Fed as a marker of inflation pressures, eased back, according to Bankrate.com. The alternating good news/bad news on the economy has kept mortgage rates in a narrow band of approximately one-eighth of a percentage point in the past two months.
The following is a sampling of Bankrate.com’s average 30-year-mortgage interest rates this week in some U.S. metropolitan areas:
New York – 6.27 percent with 0.02 point
Los Angeles – 6.33 percent with 0.38 point
Chicago – 6.43 percent with 0.06 point
San Francisco – 6.24 percent with 0.44 point
Philadelphia – 6.29 percent with 0.3 point
Detroit – 6.35 percent with no points
Boston – 6.34 percent with 0.06 point
Houston – 6.24 percent with 0.44 point
Dallas – 6.16 percent with 0.47 point
Washington, D.C. – 6.21 percent with 0.5 point