Bankrate: Softer Home Sales Lead Mortgage Rates Lower

Mortgage rates fell, aided by a slower pace of home sales. The average 30-year fixed rate mortgage dropped from 6.34 percent to 6.27 percent, according to Bankrate.com’s weekly national survey of large lenders. The 30-year fixed rate mortgages in this week’s survey had an average of 0.34 discount and origination points.

The average 15-year fixed mortgage rate retreated by a similar amount, from 5.99 percent to 5.93 percent, and the average jumbo 30-year fixed rate slumped from 6.53 percent to 6.48 percent. Adjustable rate mortgages declined as well, with the average 5/1 adjustable rate mortgage sliding from 6.08 percent to 6.02 percent, and the average one-year ARM decreasing to 5.65 percent from 5.73 percent last week.

Fixed mortgage rates declined for the second week in a row. Last week it happened after bond investors turned a blind eye toward inflation concerns, appeasing themselves that core inflation was not at troublesome levels. This week, the movement in mortgage rates was dominated by reports on slowing sales of both new and existing homes. Coupled with rising inventories of homes available for sale, the cooling housing market has kept a lid on bond yields and mortgage rates. Mortgage rates are closely related to yields on long-term government bonds.

Mortgage rates are nearly one-half percentage point higher than six months ago. At the end of August 2005, the average 30-year fixed mortgage rate was 5.8 percent, meaning that the monthly payment on a loan of $165,000 was $968.14. With the average 30-year fixed rate at 6.27 percent, the same loan would now carry a payment of $1,018.08. Although fixed mortgage rates are higher than six months ago, the increase pales compared to the increases in interest rates and monthly payments facing adjustable rate mortgage borrowers. Fixed mortgage rates remain an attractive refinancing alternative for adjustable rate borrowers.

Bankrate’s national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week’s move in mortgage rates, go to: http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate’s weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. This week, two-thirds of panelists predict rates to rebound and move higher. The remaining respondents expect rates to remain unchanged in coming weeks, with no one expecting rates to fall further.

For the full mortgage Rate Trend Index, go to: http://www.bankrate.com/RTI