| Mortgage rates fall
for 4th week |
| By Holden
Lewis • Bankrate.com |
|
As rates continue to drop, more people are refinancing
their home loans and fewer people are getting adjustable-rate mortgages.
The benchmark 30-year fixed-rate mortgage fell 6
basis points to 6.51 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 0.33 discount and origination points. One year ago, the mortgage
index was 5.88 percent; four weeks ago, it was 6.89 percent.
The 15-year fixed-rate mortgage fell 2 basis points to 6.23 percent.
The 5/1 adjustable-rate mortgage fell 4 basis points to 6.28 percent.
 |
Weekly national mortgage survey |
|
| This week's rate: |
6.51% |
6.23% |
6.28% |
| Change from last week: |
-0.06% |
-0.02% |
-0.04% |
| Monthly payment: |
$1,044 |
$1,412.95 |
$1,019.15 |
| Change from last week: |
-$6.52 |
-$1.55 |
-$4.31 |
Refis and fixed rates
Mortgage rates have fallen for the fourth week in a row and have
fallen six of the past seven weeks. The 30-year fixed is at its
lowest level since April, and rates are luring people back into
mortgage offices. While purchase mortgage applications were down
last week, refinance applications were up. Some 39.6 percent of
mortgage applicants were refinancers, compared to 38 percent a week
earlier.
A sizable majority of applicants are getting fixed-rate
loans. Just 27.2 percent applied for adjustable-rate mortgages last
week -- the lowest share since February 2004.
Getting a fixed-rate loan is the logical move for
a lot of borrowers, because the rates on ARMs aren't as competitive
as they used to be. A year ago, the average rate on a 5/1 ARM was
5.56 percent, or 32 basis points lower than the 30-year fixed. This
week, the 5/1 ARM is 23 basis points lower than the 30-year fixed.
Israel, the Fed and inflation
Rates fell this week in response to a variety of happenings. There
was a cease-fire between Israel and Hezbollah. The Fed declined
to raise short-term rates last week. More important, the government
produced evidence that the inflation rate is slowing from a canter
to a trot. Slower inflation leads to lower interest rates.
The Producer Price Index, which measures inflation at the wholesale
level, actually fell in July when you toss food and fuel out of
the shopping cart. The core PPI fell 0.3 percent, led by declines
in the prices of light trucks and computers. In reality, computer
prices might not have gone down, but when you get a faster processor,
more memory and bigger storage for the same price, the feds count
that as a price decline.
On Wednesday, the government reported that core retail
prices rose less than expected in July. The consumer price index
went up 0.2 percent when you exclude food and fuel. Economists had
been expecting a 0.3 percent rise in the core rate. Bond yields
fell, and mortgage rates followed.
"Maybe the Fed made the right decision"
when the central bank decided last week to stop raising short-term
rates, says Bob Moulton, president of Americana Mortgage in New
York. He says the halt, after 17 consecutive rate hikes, was a sound
psychological move because it buoyed the spirits of business executives.
Folks in the construction and mortgage industries could use a
lift. Housing starts fell 16.6 percent in July compared to July
2005, and building permits are down more than 20 percent compared
to a year ago.
'Flippers are gone'
The National Association of Home Builders cranked the spin machine
to high, saying that the "moderate decline in starts was anticipated"
and that builders are adjusting to market conditions by building
fewer houses and offering incentives to prospective buyers.
Mortgage bankers are reaching for the Alka-Seltzer,
too. Loan applications have fallen more than 25 percent compared
to the same week a year ago. "The overall trends of home sales
and housing starts have been consistently going down," Moulton
says. "I think, in terms of housing starts, if you look at
a year and a half ago, builders were building on spec, investors
were coming into the market and selling within six to 12 months.
I think those people are gone. Flippers are gone. You're dealing
with the traditional transaction -- families that are growing and
empty nesters with a home to sell."
Oh, and one other type of transaction: cash-out refinances. In
the first half of this year, a big majority of refinances were cash-out
refis, in which the homeowner borrows at least 5 percent more than
the previous loan balance. The typical borrower used the cash to
pay down higher-rate debt from credit cards, home equity lines of
credit and auto loans.
In all probability, most refinancers are still going
down the cash-out road.
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