Mortgage rates fall as housing market cools
By Holden Lewis • Bankrate.com

Mortgage rates fell across the board this week as evidence accumulated that the housing market is softening but not collapsing.

The benchmark 30-year fixed-rate mortgage fell 7 basis points to 6.27 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.34 discount and origination points. One year ago, the mortgage index was 5.87 percent; four weeks ago, it was 6.28 percent.

The 15-year fixed-rate mortgage fell 6 basis points to 5.93 percent. The 5/1 adjustable-rate mortgage fell 6 basis points to 6.02 percent. Four weeks ago, the 5/1 ARM was at 5.89 percent, so it has gone up 13 basis points in one month while the 30-year fixed has fallen 1 basis point over the same period.

Meanwhile, U.S. home prices either are stagnating or are still rising, depending on which data you look at. The interaction between prices and interest rates is bad news for renters who want to buy, because houses in most parts of the country aren't becoming any more affordable. And mortgage rates have been on an upward trend since October, which doesn't exactly make homeowners feel warm and tingly.

Owners with ARMs feel heat
If mortgage rates rise this year, one-quarter of homeowners say they will be able to make their mortgage payments with some difficulty, and 5 percent say they would be forced to sell their homes, according to a poll commissioned by TrueCredit, a subsidiary of credit-reporting giant TransUnion.

Call those 30 percent of homeowners the worriers.

Lucy Duni, director of consumer education for TrueCredit, believes that these people are more likely to have adjustable-rate mortgages.

TrueCredit sells credit reports, credit scores and credit-monitoring services to consumers. Duni believes that a lot of the company's customers are homeowners who are checking up on their credit before refinancing out of adjustable-rate mortgages and into fixed-rate loans. ARM rates have risen faster than fixed rates in the last few weeks, giving homeowners an incentive to ditch their ARMs and embrace the security of fixed-rate mortgages.

In the poll, 42 percent of homeowners said they would be able to comfortably make their mortgage payments even if rates increased. Another 22 percent of homeowners in the survey didn't have mortgages, and the rest didn't know how rising rates would affect them.

Home sales off, not prices
Three widely watched reports of home sales and home prices were released in the past week: the U.S. Census survey of new home sales, the National Association of Realtors' index of resales of previously owned homes, and OFHEO's house price index. The gist of the three reports: Home sales might be down, but prices aren't.

The Census said new home sales fell 5 percent in January from the month before and that the median price of a new home rose $9,100, to $238,100. Half of houses nationwide cost more than the median price.