A disappointing labor market report and terrorist bombings in India helped take mortgage rates lower this week, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac’s survey, the 30-year fixed-rate mortgage fell to an average 6.74 percent this week, down from last week’s average of 6.79 percent. The average for the 15-year fixed dropped to 6.37 percent from last week’s average of 6.44 percent.
Points, which are fees charged by lenders for loan processing expressed as a percent of the loan, averaged 0.6 on the 30-year and 0.4 on the 15-year loans.
The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 6.33 percent this week, with an average 0.5 point, down from last week’s average of 6.39 percent. The one-year Treasury-indexed ARM averaged 5.75 percent, with an average 0.6 point, down from last week when it averaged 5.83 percent.
“June’s employment report caught financial markets off guard. In response, long-term bond yields eased a bit this week,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Combined with the financial market’s expectation of only one more rate hike by the Federal Reserve this year, upward pressure on long-term rates eases considerably. This should keep mortgage rates relatively stable for the foreseeable future.”
In Bankrate.com’s survey, the average 30-year fixed-rate mortgage dipped to 6.87 percent from 6.91 percent last week, and these loans had an average of 0.31 discount and origination points.
The average 15-year fixed-rate mortgage popular for refinancing slid to 6.47 percent, according to Bankrate.com’s latest survey. On larger loans, the average jumbo 30-year fixed rate decreased slightly, but remains above the 7 percent threshold at 7.03 percent. Adjustable-rate mortgages were mixed this week, as the average 5/1 ARM fell to 6.52 percent, and the average one-year ARM increased to 6.12 percent.
Two things happened to bring mortgage rates down this week, Bankrate.com reported. One was the reaction to Tuesday’s train bombings in Mumbai, India. At times of international tension, investors buy U.S. Treasury notes, and such a buying spree depresses bond yields. Mortgage rates often follow. By Tuesday afternoon, bond yields had risen almost, but not quite, to their levels before the train bombings.
The bigger factor in this week’s rate drop comes from Wall Street’s reaction to the June employment report, released Friday by the Labor Department. Most investors expected the report to say that the economy had grown by 160,000 to 175,000 jobs in June. As it turned out, the report said non-farm payrolls grew by 121,000. The lower-than-expected estimate caused investors to reason that with a slower job market, corporate payroll stays down, inflation is more likely to be restrained and may influence the Federal Reserve to stop raising short-term interest rates, which could take away some of the upward pressure on long-term mortgage rates.
Fixed mortgage rates are considerably higher than one year ago, according to Bankrate.com, when the average 30-year fixed mortgage rate was 6.11 percent and the monthly payment on a loan of $165,000 was $1,001. With the average 30-year fixed rate now 6.87 percent, the same loan originated today would carry a payment of $1,083. Despite recent increases, fixed mortgage rates remain an attractive refinancing alternative for adjustable-rate borrowers facing sharp payment adjustments, Bankrate.com said.
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 – 6.83 percent with 0.22 point
Los Angeles – 6.91 percent with 0.47 point
Chicago – 7 percent with 0.06 point
San Francisco – 6.93 percent with 0.28 point
Philadelphia – 6.75 percent with 0.38 point
Detroit – 6.91 percent with no points
Boston – 6.87 percent with 0.14 point
Houston – 6.96 percent with 0.37 point
Dallas – 6.88 percent with 0.47 point
Washington, D.C. – 6.68 percent with 0.66 point