Experts: Mortgage rates should fall following
this week's drop in bonds
June 17, 1998
By Marian
Miller King • Bankrate.com
Fixed mortgage rates again dropped
slightly in the Wednesday survey of large institutions, keeping
the 30-year fixed rate below 7 percent.
 The
30-year dropped 0.02 percent to stand at 6.97 percent, while the
15-year slipped 0.01 percent to 6.67 percent. The one-year adjustable
rate slid 0.06 percent to 5.70 percent.
Thirty-year
Treasury bond yields are the pricing gauge for most 30-year conventional
loan interest rates, along with higher-priced mortgage-backed securities.
Since the bonds dropped to their lowest level ever this week, mortgage
rates could dive as well.
However,
it should be a temporary plunge, since both bonds and mortgage rates
are likely to level out as market jitters about the ailing Japanese
economy's effect on U.S. corporate profits subside.
For
now, though, the bond market is enjoying a return of investors,
while the stock market took a serious blow Monday as a result of
international trading skittishness.
As
bond yields decline, some market analysts are predicting a resurgence
in mortgage refinance activity. Others predict new home sales will
continue to skyrocket.
"It's
been a good year," said Pete Wissinger, managing director of consumer
lending and servicing for Norwest Mortgage Inc. in Minneapolis.
"Rates are back to where they were earlier this year, and we're
enjoying some great mortgage origination volume."
Wissinger
said the refinance activity slowed down after January, but in the
following three or four months the "purchase business poured in
behind it."
"I
think consumer confidence is high and purchase activity will continue
to ramp up," he said. "People are making money in the stock market
and they're out there, upgrading their housing or getting retirement
homes or second vacation homes. Lending activity will continue to
build, and it will be purchase-driven."
Retail
sales are doing well and home sales are booming in most all regions
of the country, but particularly in the South. All these things
bode well for a strong domestic economy, but as the stock market
discovered this week, volatile economic conditions in Japan and
Asian strongholds have a marked impact on international trading.
And that impact -- good or bad -- affects bond prices and yields,
which, in turn, affect mortgage rates.
The monthly principal and interest on a $100,000 30-year fixed rate
stands at $663, down from $664 a week ago. Interest paid during
10 years dropped $201 in the week, from $65,547 to $65,346.
 The
monthly principal and interest on the same balance during 15 years
stands at $880.
The Bankrate.com National Index is based on
a Wednesday survey of the 50 largest banks and the 50 largest thrifts
in the 10 largest metropolitan areas in the country. These are averages.
To find specific rates offered by lender, go to our mortgage
rate search engine.
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