A rise in jobless claims and weaker employment growth sent mortgage rates down this week, according to surveys conducted by Freddie Mac and Bankrate.com.
In Freddie Mac’ survey, the 30-year fixed-rate mortgage fell to an average 6.28 percent from last week’s 6.34 percent, while the average rate on 15-year fixed-rate loans dipped from 6.06 percent to 6.02 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.3 on the 30- and 15-year loans.
“News of moderate employment gains in January led to a halt in the recent upward trend of interest-rate movements,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The 111,000 jobs added last month were fewer than had been anticipated, while the unemployment rate edged up unexpectedly.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) also declined this week, falling to an average 5.99 percent with an average 0.4 point, while one-year Treasury-indexed ARMs sank from 5.54 percent to 5.49 percent, with points averaging 0.7.
“Throughout the year we expect rates on 30-year mortgages to average between 6.3 and 6.5 percent,” Nothaft said. “The flat or increasing rate environment will likely cause the refinance share to contract gradually. In addition, the dollar volume of home equity cashed-out will also retreat from the record level of $314 billion set in 2006 to around $230 billion this year.”
In Bankrate.com’s survey, mortgage rates dropped for the first time in two months, with the average 30-year fixed mortgage rate falling to 6.31 percent, which more than reverses the previous week’s increase. Discount and origination points on the 30-year loans averaged 0.31.
The average 15-year fixed-rate mortgage popular for refinancing sank to 6.08 percent, according to Bankrate.com. On larger loans, the average jumbo 30-year fixed rate plunged to 6.48 percent. Adjustable mortgage rates also declined, with the average 5/1 ARM backtracking to 6.17 percent and the average one-year ARM settling at 6.04 percent.
Bankrate.com said mortgage rates have been on the rise for much of the past two months because of stronger-than-expected economic reports. But this week, it was more good economic news that led mortgage rates to retreat. It began when the Federal Open Market Committee acknowledged improved inflation readings over the past few months at the conclusion of its Jan. 31 meeting. The good news on the inflation front continued with reports on labor costs, and the Fed’s favored expenditures index also showing improvement. Fewer inflation worries translated to lower bond yields, to which mortgage rates are closely tied.
Fixed mortgage rates are notably lower than last summer when the Fed last raised interest rates, Bankrate.com reported. At the time, the average 30-year fixed mortgage rate was 6.93 percent, and a $165,000 loan carried a monthly payment $1,090. With the average 30-year fixed rate now 6.31 percent, the same loan originated today would carry a monthly payment of $1,022, which is a compelling refinancing alternative for adjustable-rate borrowers facing sharp payment adjustments.
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 0.13 point
Los Angeles – 6.43 percent with 0.43 point
Chicago – 6.45 percent with 0.06 point
San Francisco – 6.2 percent with 0.63 point
Philadelphia – 6.32 percent with 0.3 point
Detroit – 6.31 percent with 0.03 point
Boston – 6.4 percent with 0.04 point
Houston – 6.27 percent with 0.5 point
Dallas – 6.2 percent with 0.53 point
Washington, D.C. – 6.24 percent with 0.44 point