Surprise! Mortgage rates drop

By Palm Beach Business.com

DELRAY BEACH — Mortgage rates, which had been shooting higher the past couple of weeks, settled back down this week.

This week’s Freddie Mac’s Primary Mortgage Market Survey found the 30-year fixed-rate mortgage averaging 5.38 percent with an average 0.7 point, down from 5.59 percent a week ago.

Bankrate.com, meanwhile, spotted 30-year mortgage at 5.76 percent, down from 5.95 percent a week ago. The mortgage came with an average of 0.43 point.

Two key reports on inflation over the past week calmed the waters, so to speak.

“Reports of benign inflation figures reversed the upward trend of mortgage rates this week,” Freddie Mac Chief Economist Frank Nothaft said. “The producer price index rose only 0.2 percent in May, roughly a third less than the consensus forecast and the consumer price index increased by just 0.1 percent. Moreover, the 12-month drop of 5.0 percent in producer prices was the largest since 1949 and the 1.3 percent yearly decrease in consumer prices the biggest since 1950.”

It’s doubtful that rates will remain this low. One local mortgage manager said rates began to creep upward in the past few days and likely will surpass 5.50 percent in the near term. That might seem high when compared to rates in the high 4s or low 5s that borrowers have enjoyed for much of the year, but they’re still low by historic standards.

Bankrate's panel of mortgage experts sees rates falling, however. More than half the panelists expect rates to decline, while 20 percent expect a rebound and 27 percent expect mortgage rates to remain more or less unchanged over the next 30 to 45 days.

Freddie Mac noted that a year ago at this time, the 30-year averaged 6.42 percent.

Also from the Freddie Mac survey:

— The 15-year fixed rate averaged 4.89 percent with an average 0.7 point, down from 5.06 percent a week ago.

— Five-year adjustable-rate mortgages averaged 4.97 percent this week, down from last week’s 5.17 percent. A year ago, the 5-year ARM averaged 5.89 percent.

— One-year Treasury-indexed ARMs averaged 4.95 percent this, down from last week’s 5.04 percent.

Also from the Bankrate survey:

The average 15-year fixed rate mortgage sank to 5.19 percent, while the average jumbo 30-year fixed rate inched higher to 6.97 percent. Adjustable rate mortgages were mixed, with the average 3-year ARM rising to 5.38 percent and the 5-year ARM dropping to 5.37 percent.