Mortgage rates plunge
By Holden Lewis • Bankrate.com

Mortgage rates plunged this week, and hardly anyone took advantage.

Business is dead, a mortgage broker laments, and the latest stats from the Mortgage Bankers Association bears out that assessment. The MBA says mortgage applications fell 3.3 percent last week and are 11.2 percent lower than the same week last year.

All while rates were rushing downhill as fast as a toboggan after a blizzard.

The benchmark 30-year, fixed-rate mortgage fell 15 basis points to 6.31 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 0.25 discount and origination points. One year ago, the mortgage index was 6.37 percent; four weeks ago, it was 6.31 percent.

The 15-year, fixed-rate mortgage fell 14 basis points to 6.02 percent. The 5/1 adjustable-rate mortgage fell 15 basis points to 6.13 percent.

Weekly national mortgage survey

Results of Bankrate.com's Nov. 1, 2006, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

Rates fell at the same time that economic reports seemed to be signaling that the economy was going through an icy patch. Factory orders fell, construction spending was down and an index of future home sales showed that sellers will continue to have reasons to weep. When it looks like the economy is about to slow down, long-term interest rates tend to fall.

Balmy bulletin snubbed
There was positive economic news, too -- such as a report that wages and benefits are rising at the fastest rate in two years -- but investors were paying attention to the lousy news. Then there's the upcoming elections.

There's a long-standing perception that Wall Street isn't happy when the Democrats wield power, and the Democrats look poised to win at least one chamber of Congress. If that bothers Wall Street firms and their employees, they have a weird way of showing it: In this midterm election cycle, 51 percent of their contributions have gone to the Democratic Party and its candidates, and 47 percent has gone to the Republican Party and its candidates, according to records compiled by The Center for Responsive Politics.

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In other words, it looks like this week's slide in mortgage rates isn't the result of a temper tantrum on Wall Street.

So what's going on? Bob Moulton, the broker who laments the lifelessness of the mortgage biz, says most of the signs are good. "The rates are great," says Moulton, president of Americana Mortgage in Manhasset, N.Y. "The stock market is at an all-time high. Gas prices are down." A year ago, he says, mortgage business was down and everyone was attributing that to high gasoline prices and rising long-term rates. Those excuses are gone, but the problem persists.

Moulton guesses that people are, believe it or not, too busy to pay attention to the daily and weekly gyrations of mortgage rates. They pay attention to the Federal Reserve's rate moves, "not really appreciating how long-term rates vary differently from what the Fed does."

And how. The Fed raised short-term interest rates 17 times in a row over two years and finally stopped at its Aug. 8 policy meeting, keeping rates steady at 5.25 percent. The federal funds rate has remained unchanged since then, while mortgage rates have slipped about 30 basis points. Moulton worries that a lot of homeowners don't know this and are missing opportunities to refinance.