Weak economy helps sink mortgage rates

By Palm Beach Business.com

DELRAY BEACH — Continued evidence of a weak economy helped push mortgage rates down, according to the latest surveys from Freddie Mac and Bankrate.com

Freddie Mac’s Primary Mortgage Market Survey found the average 30-year fixed-rate mortgage falling to 5.32 percent down from last week’s 5.42 percent. The mortgage came with an average 0.7 percent point. A year ago, the 30-year averaged 6.35 percent.

Meanwhile, Bankrate’s national mortgage survey spotted the 30-year at 5.70 percent, down from 5.8 percent a week ago. It came with an aver 0.48 point.

Bankrate cited mounting evidence that the economy remains weak is helping keep rates down. Unemployment is up; the Commerce Department said  the economy contracted at an annual rate of 5.5 percent in the first quarter of the year, and consumers increasing saving faster than spending, all contributed to a decline in government bond yields and mortgage rates.

Fixed mortgage rates are closely related to yields on long-term government debt. Mortgage rates are likely to bob up and down as concerns alternate between economic weakness and future inflation, and spurts of volatility should be expected, especially given the uncertain economic and financial climate.

The low rates continue to be a bonanza for one long-suffering section of the economy.

“Lower mortgage rates are helping to support the housing market,” Freddie Mac Chief Economist Frank Nothaft said. “The 30-year fixed-rate mortgage rate peaked this year over the week of June 11 and are now around a quarter-of-a-percentage point lower this week. This has led to a 7.2 percent increase in conventional mortgage applications for home purchases by the last full week of June, according to the Mortgage Bankers Association.”

Bankrate illustrates the difference interest rates can make: A year ago, when the 30-year averaged 6.53 percent, a $200,000 loan would have carried a monthly payment of $1,268.08. At 5.70 percent, the monthly payment for the same loan drops to $1,160.80, a savings of $108 a month.

Also from the Freddie Mac survey:

— The 15-year fixed rate mortgage averaged 4.77 percent with an average 0.7 point, down from last week’s 4.87 percent. A year ago at this time, the 15-year FRM averaged 5.92 percent.

— Five-year adjustable-rate mortgages averaged 4.88 percent this week, with an average 0.7 point, down from 4.99 percent a week ago.

— One-year ARMs averaged 4.94 percent with an average 0.6 point, up slightly from last week’s 4.93 percent. At this time last year, the 1-year ARM averaged 5.17 percent.

Also from the Bankrate survey: the 15-year fixed rate mortgage retreated to 5.07 percent, while the average jumbo 30-year fixed rate fell below the 7 percent mark to 6.91 percent. Adjustable rate mortgages were mixed, with the average 1-year ARM rising to 5.17 percent and the 5-year ARM dropping to 5.17 percent.

Bankrate's Rate Trend Index sees rates more than likely staying put or falling over the near term. Only 8 percent of the index panelists see rates rising; the remaining 92 percent are evenly split between rates falling further or holding their ground.