| Mortgage rates fall
for 3rd week |
| By Holden
Lewis • Bankrate.com |
|
Mortgage rates dropped for the third week in a row
and for the fifth of the last six weeks.
The benchmark 30-year fixed-rate mortgage fell 8 basis points
to 6.57 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 0.32
discount and origination points. One year ago, the mortgage index
was 5.96 percent; four weeks ago, it was 6.87 percent.
The 15-year fixed-rate mortgage fell 5 basis points
to 6.25 percent. The 5/1 adjustable-rate mortgage fell 4 basis points
to 6.32 percent.
The pause
in the Federal Reserve's rate-hike campaign "allows the market
to stay where it's at," says Bill Emerson, chief executive
officer of Quicken Loans. "I think it had spoken with the decrease
in rates of the last several weeks."
For a while, falling rates didn't entice borrowers
into mortgage offices. But you can't keep an American away from
easy money for long, and now borrowers are motivated. Mortgage applications
increased almost 5 percent last week, according to the Mortgage
Bankers Association. Almost four in 10 applicants are homeowners
who intend to refinance their mortgages.
 |
Weekly national mortgage survey |
|
| This week's rate: |
6.57% |
6.25% |
6.32% |
| Change from last week: |
-0.08% |
-0.05% |
-0.04% |
| Monthly payment: |
$1,050.52 |
$1,414.50 |
$1,023.46 |
| Change from last week: |
-$8.72 |
-$4.50 |
-$4.31 |
Things look clearer when you think about what has
happened to home equity lines of credit. Credit lines are indexed
to the prime rate, which has gone up 4.25 percentage points in a
little over two years. A lot of people were paying 4 percent on
their lines of credit in May 2004, and now they're paying 8.25 percent.
In what is known as a cash-out refi, they are refinancing their
primary mortgages for more than the balance owed and paying off
their credit lines with the leftover money.
Freddie Mac estimates that homeowners liberated $74
billion in equity through cash-out refis in the first quarter and
$81 billion in the second quarter.
"As house price appreciation continues to slow, this mechanism
for sustaining consumer spending will diminish, leaving homeowners
with less wiggle room to balance higher interest rates with slower
income growth," Freddie Mac's chief economist, Frank Nothaft,
writes in his August economic outlook.
At some point, consumers are going to have to start paying off
debts the old-fashioned way: by living within their means instead
of using their houses as automated tellers.
| 
