Mortgage rates dropped for the fifth straight week to lows not seen since April on expectations that the housing market slowdown will ease inflation fears, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac’s survey, the 30-year fixed-rate mortgage sank to an average 6.48 percent this week, down from last week’s average of 6.52 percent, and is now at its lowest since April 6, 2006, when it averaged 6.43 percent.
The average for the 15-year fixed-rate mortgage also fell from last week, down to 6.18 percent from 6.2 percent, and is now at its lowest point since the week ending April 20, when it was 6.17 percent.
Points, which are fees charged by lenders for loan processing expressed as a percent of the loan, averaged 0.4 on the 30- and 15-year loans.
The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) fell to 6.14 percent this week, with an average 0.5 point, down from last week’s rate of 6.18 percent. The one-year Treasury-indexed ARM averaged 5.6 percent, with an average 0.7 point, down from last week when it averaged 5.65 percent.
“The Fed has acknowledged that it is closely monitoring the housing market as it slows down from last year’s record pace,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Although this fuels arguments about whether we will experience a soft landing or a bursting housing bubble, market watchers also perceive that it’s possible that the Fed may stop raising short-term interest rates over the near term. This perception takes upward pressure off mortgage rates.
“Meanwhile, although both existing- and new-home sales for July fell below market expectations — confirming the slowdown in the housing market — we still expect 2006 to be the third-highest year on record for total sales.”
In Bankrate.com’s survey, mortgage rates declined for the seventh time in the last eight weeks, aided by last week’s better-than-expected reading on the Consumer Price Index. The average 30-year fixed-rate mortgage fell to 6.48 percent, the lowest since March 29, according to Bankrate.com’s weekly national survey of large lenders, and these loans had an average of 0.32 discount and origination points.
The average 15-year fixed rate mortgage, popular for refinancing, dropped by a similar amount to 6.19 percent, Bankrate.com reported. On larger loans, the average jumbo 30-year fixed rate declined to 6.74 percent. Adjustable-rate mortgages also backtracked, with the average 5/1 ARM sliding to 6.24 percent, and the average one-year ARM retreating to 6 percent.
Slower economic growth and the Fed hitting the pause button have helped bring fixed mortgage rates to a five-month low, according to Bankrate.com’s survey. Although inflation remains a threat, bond investors are confident in the Fed’s forecast that inflation will recede as the economy cools. Bond yields and fixed mortgage rates both reflect some concern on the part of investors that the economy will slow too much, causing the Fed to cut rates at a later date. Fixed mortgage rates are closely related to yields on long-term government bonds.
Bankrate.com reported that fixed mortgage rates have fallen nearly one-half of a percentage point since the Fed last hiked rates at the end of June. At the time, the average 30-year fixed mortgage rate was 6.93 percent, meaning that the monthly payment on a loan of $165,000 was $1,090. With the average 30-year fixed rate now 6.48 percent, the same loan originated today would carry a monthly payment of $1,041. With the recent pullback, 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 – 6.42 percent with 0.26 point
Los Angeles – 6.53 percent with 0.53 point
Chicago – 6.63 percent with 0.06 point
San Francisco – 6.52 percent with 0.32 point
Philadelphia – 6.33 percent with 0.48 point
Detroit – 6.55 percent with 0.03 point
Boston – 6.51 percent with 0.18 point
Houston – 6.52 percent with 0.32 point
Dallas – 6.46 percent with 0.43 point
Washington, D.C. – 6.36 percent with 0.58 point