A disappointing December for retail sales helped push mortgage rates lower this week, with rates on 30- and 15-year fixed mortgages down to their lowest levels since July 2005, Freddie Mac reported today.

The average rate on 30-year fixed mortgages dropped 18 basis points in the last week, from 5.87 percent to 5.69 percent, and the average 15-year fixed mortgage tumbled 22 basis points, from 5.43 percent to 5.21 percent. Points, or fees that lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 and 0.4, respectively, on the 30- and 15-year loans.

Freddie Mac reported that average rates on adjustable-rate mortgages (ARMs) also declined, with the five-year Treasury-indexed hybrid ARM falling from 5.63 percent to 5.4 percent and the one-year ARM dropping from 5.37 percent to 5.26 percent. Points on these loans averaged 0.6.

“The latest retail sales report indicated that shoppers scaled back spending in December, as retail sales declined by 0.4 percent from November’s level,” said Frank Nothaft, Freddie Mac vice president and chief economist, in a prepared statement. “Particularly weak were sales of building materials, garden equipment and supply stores, which fell by 2.9 percent from the previous month. The declines aggravated concerns about the well being of the economy and exerted downward pressure on mortgage rates.”

Nothaft said that mortgage rates have fallen in each of the last three weeks, adding that “the results from this week’s survey mark the first time in seven years that the average rate on the 15-year (fixed-rate mortgage) is lower than the average rate on 1-year adjustable-rate mortgages.”

Bankrate.com on Wednesday in its weekly mortgage survey stated that the decline in rates the last three weeks hasn’t been this steep since February 1988, adding that “weak retail sales for December and the very direct comments of Fed Chairman Ben Bernanke were the economic headlines that helped push mortgage rates lower. Specifically, Bernanke mentioned that the economic outlook had ‘worsened,’ and that the Fed might need ‘substantive additional action’ in a ‘decisive and timely’ manner to ward off further deterioration to economic growth. As a result, investors continue to park money in safe havens such as Treasury securities.”

Monthly payments on 30-year fixed-rate mortgages with loans of $200,000 are considerably cheaper now than they were six months ago, according to Bankrate.com. On July 25, the average 30-year fixed mortgage rate was 6.75 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,297. Today, a 30-year fixed loan at Bankrate.com’s current average of 5.75 percent carries a monthly payment on the same $200,000 loan of $1,167 — a monthly savings of $130.


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