Long-term mortgage rates continued to fall this week as problems in the subprime market forced investors to seek more stable securities, driving up bond prices and lowering yields, Freddie Mac and Bankrate.com reported today.
In Freddie Mac’s survey, the 30-year fixed-rate mortgage dipped to an average 6.67 percent from 6.69 percent last week, and the 15-year fixed-rate loan fell to 6.34 percent from 6.37 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.4 on the 30- and 15-year loans.
Costs on adjustable-rate mortgages (ARMs) were down again this week, with the five-year Treasury-indexed hybrid ARM slipping to 6.3 percent from 6.31 percent a week ago and the one-year ARM inching lower to 5.65 percent from 5.66 percent.
“Mortgage rates edged down slightly for the second week in a row after having risen over the previous month and a half, and as financial markets prepared for the June 28th Federal Open Market Committee’s announcement on monetary policy,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a prepared statement.
“This week we saw further effects of the current housing recession. May’s existing-home sales (including condominiums and co-ops) fell 0.3 percent to the slowest pace since June 2003, and the number of months houses were available for sale rose to 8.9, the longest since June 1992. In addition, home prices fell 2.1 percent in 20 metropolitan areas for the year ending April 2007, according to the S&P/Case Shiller composite index, the largest year-over-year drop since the data began in January 2001.”
In Bankrate.com’s survey, mortgage rates declined for the second straight week after jumping sharply between mid-May and mid-June. The average 30-year fixed mortgage rate retreated to 6.74 percent, with discount and origination points on these loans averaging 0.26.
The average 15-year fixed-rate mortgage, popular for refinancing, dropped by a similar amount, to 6.4 percent, Bankrate.com reported. With larger loans, the average jumbo 30-year fixed rate dipped to 6.96 percent. Adjustable-rate mortgages were mixed, with the average 5/1 ARM sinking to 6.47 percent, while the one-year ARM increased to 6.23 percent.
Bankrate.com attributed the lower interest rates to nervousness about deteriorating conditions in the subprime market, which sparked a “flight to quality.” The mounting delinquencies and foreclosures in the subprime sector and the ensuing debacle among hedge funds that feasted on subprime debt mean lower rates for many mortgage borrowers. When troubles surface in riskier forms of debt, investors predictably seek shelter in safer havens, such as U.S. Treasury securities or bonds backed by the mortgages of borrowers with strong credit quality. This served to drive bond yields and fixed mortgage rates lower over the past week.
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 – 6.72 percent with 0.06 point
Los Angeles – 6.79 percent with 0.41 point
Chicago – 6.82 percent with 0.05 point
San Francisco – 6.7 percent with 0.48 point
Philadelphia – 6.79 percent with 0.15 point
Detroit – 6.73 percent with 0.01 point
Boston – 6.79 percent with 0.03 point
Houston – 6.73 percent with 0.46 point
Dallas – 6.67 percent with 0.48 point
Washington, D.C. – 6.64 percent with 0.44 point