Mortgage Rates Drop As Inflation Threat Wanes
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Mortgage rates continued a general downward trend during the
week ended November 16 with the long term rate retreating substantially.
According to Freddie Mac and its Primary Mortgage Market Survey, the 30-year
fixed-rate mortgage (FRM) averaged 6.24 percent. This was 9 basis points below
the average rate for the week ended November 9 and 14 basis points lower than
the rate one year ago.
The 15-year FRM also dropped nine basis points to 5.94 percent with 0.5 point.
One year ago this product averaged 5.90 percent.
Declines in adjustable rate mortgages (ARMs) were less pronounced.
The five-year Treasury-indexed ARM averaged 6.04 percent compared with 6.08
a week earlier. One year ago that rate was 5.86 percent. The one-year Treasury-indexed
ARM averaged 5.53 percent, 2 basis points lower than last week. One year ago
that rate was 5.20 percent.
All products carried an average of 0.5 in fees and points which represented
no change for the two FRMs but was 0.2 and 0.3 less respectively than the 5/1
and 1-year ARM one week earlier.
According to Frank Nothaft, Freddie Mac vice president and chief economist,
"Both long- and short-term mortgage
rates fell this week on early signs that the threat of inflation may be
waning, The Producer Price Index (PPI) and Consumer Price Index (CPI) for October
came in lower than expected and bond yields dropped, pulling mortgage rates
lower.
He went on to predict that, "we've probably seen the
worst of the housing slump, although it may not have entirely bottomed out yet.
On the other hand, lower mortgage rates should help stimulate activity in the
housing market."
The Mortgage Bankers Association whose own Weekly Mortgage Applications Survey
is often out of sync with Freddie Mac went one for three in with FM in its latest
survey week which ended November 17. MBA's survey reported that the 30-year
FRM was down to 6.13 percent from 6.15 with points, including the origination
fee decreasing to 0.95 from 0.98. This is the lowest rate recorded by MBA for
the long term mortgage since January 2006.
However, MBA found that the average contract interest rate for the 15-year FRM
was up three basis points to 5.88, although points decreased to 0.96 from 1.0.
The one-year ARM crept up to 5.88 percent from 5.87 with points moving to 0.8
from 0.78.
All quoted rates are for 80 percent loan
to value originations.
Mortgage applications were down 3.7 percent on a seasonally
adjusted basis from one week earlier but increased 5.1 percent on an unadjusted
basis. Year-over-year, applications were off only 0.1 percent from the same
period in 2005.
Refinancing has rebounded from the 30+ market share commonly seen in this survey
earlier in the year. During the past week refi applications represented 48.6
percent of all mortgage activity but adjustable rate mortgages are not faring
as well. For a number of weeks the market share of this product has been hovering
in the mid 20 percent range and this week it was 25.5 percent, unchanged from
the previous survey.
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