After 8 weeks, mortgage rates finally fall
By Holden Lewis • Bankrate.com

As a mortgage shopper, you track the daily and weekly movements of home loan rates, hoping to catch them at their lowest. Mortgage professionals take a longer view. They see a long-range trend of rising interest rates, with thought-provoking effects.

The upward trend didn't hold this week. For the first time in two months, Bankrate.com's benchmark 30-year, fixed-rate mortgage fell. It went down 4 basis points to 6.69 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 0.36 discount and origination points. One year ago, the mortgage index was 5.72 percent; four weeks ago, it was 6.64 percent.

The 15-year fixed-rate mortgage fell 2 basis points to 6.31 percent. The 5/1 adjustable-rate mortgage fell 6 basis points to 6.27 percent.

Bankrate conducts its rate survey on Wednesdays, and last week, that occurred on the same day that the Consumer Price Index for April was released. It showed that inflation was running higher than most investors had expected, and bond traders overreacted, sending bond yields and mortgage rates higher. Those rates and yields retreated a bit this week from that overreaction.

Overall, expect more increases
Many economists and mortgage bankers expect rates to generally rise the rest of this year, with the usual spikes and dips. The 30-year fixed has risen about half a point since January, and Doug Duncan, the Mortgage Bankers Association's chief economist, predicts that it will rise another 20 basis points or so by the end of the year.

Rate-increases past and rate-increases future have affected what people are doing in the present.

"What we're seeing is a lot of consumers are looking mostly for fixed-rate stuff," says Mike McCarthy, general manager of ditech.com, the online lending wing of GMAC Mortgage. "We see a lot of interest on fixed-rate, not only on first mortgages, but also on second mortgages."

Naturally, some of this consumer interest might come from ditech.com's advertising campaign, which prominently touts the company's toll-free number: (800) 71-FIXED. But McCarthy says it's the other way around: Managers perceived an increased demand for fixed-rate mortgages, so they cooked up that phone number and ad campaign.

McCarthy says about 50 percent to 55 percent of the lender's loan volume comes from second mortgages -- mostly fixed-rate home equity loans. That's high, and it probably comes from a combination of slower home sales and ditech.com's marketing, which targets consumers who want to consolidate their debts.

Housing market runs hot, cold
Where McCarthy works in Southern California, he doesn't see much evidence of a housing slowdown. But across the country on Long Island, N.Y., Bob Moulton sees signs (quite literally) of a buyer's market everywhere.

Moulton is president of Americana Mortgage Group, a brokerage that does business in New York, New Jersey, Connecticut and Florida. He says the sales pace has fallen -- so much so that he's advising clients about timing.

"I have a lot of people who have bought houses and can't sell their house," he says. "They're getting panicky and getting bridge loans," so they can handle mortgage payments on two homes -- the one they just bought and the one they're trying to sell. Some have to drop the price on the home they're selling.

Solution: "I'm advising people to sell before they buy," Moulton says. In such a market, where buyers are choosy, and some try to weasel out of purchase agreements when they get cold feet, it's just too iffy to count on closing a sale and a purchase on the same day.

There's a drawback to selling a house before buying another one -- you have to rent a place. With luck, you can rent the house you just sold.