| 30-year rises, but just
a bit |
| By Holden
Lewis • Bankrate.com |
|
There's good news and bad news for home shoppers.
The good news is that house prices continue to fall.
The bad news is that mortgage rates are rising, just a little.
The benchmark 30-year fixed-rate mortgage rose for the third time
in four weeks, rising 4 basis points to 6.46 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 0.35 discount and origination points.
One year ago, the mortgage index was 6.24 percent; four weeks ago,
it was 6.29 percent. It has gone up 17 basis points in a month.
The 15-year, fixed-rate mortgage rose 6 basis points
to 6.16 percent. The 5/1 adjustable-rate mortgage went up 4 basis
points to 6.28 percent.
 |
Weekly national mortgage
survey |
|
| This week's rate: |
6.46% |
6.16% |
6.28% |
| Change from last week: |
+0.04 |
+0.06 |
+0.04 |
| Monthly payment: |
$1,038.58 |
$1,406.67 |
$1,019.15 |
| Change from last week: |
+$4.33 |
+$5.38 |
+$4.29 |
Shoppers smiling
As mortgage rates rise, house prices fall. The National Association
of Realtors says existing-home sales fell 1.9 percent in September
compared to August. Of the houses that were resold in September,
half cost more than $220,000, compared with a median price a year
earlier of $225,000. That's a price drop of 2.2 percent.
Further, putting smiles on home shoppers' faces was
the Federal Reserve's decision to keep short-term rates steady.
While mortgage rates are set by the market and, thus, don't respond
directly to the Fed's rate moves, the central bank's decision should
add a calming influence.
"The Fed's decision to pause and then to take no action over
the last three meetings has brought a collective sigh of relief
for homeowners with adjustable-rate mortgages and home equity lines
of credit," says Bob Walters, chief economist for Quicken Loans.
"They know that, at least in the interim, their payment will
not change."
He says some homeowners have been refinancing out of ARMs and
into fixed-rate loans to "lock in payment security for the
foreseeable future.
Homeowners with adjustables
probably have plenty of time to "dis-ARM" by refinancing
into fixed-rate mortgages.
Doug Duncan, chief economist
for the Mortgage Bankers Association, predicts that fixed mortgage
rates will rise, but slowly. His forecast calls for the 30-year
fixed to land somewhere between 6.5 percent and 6.75 percent at
the end of 2007. That's just slightly higher than today's average
to about a quarter of a percentage point higher.
As far as home prices go, Duncan doesn't think they'll continue
to fall for much longer, especially used houses. Some would-be sellers
will take their houses off the market rather than accept low offers,
he says. Duncan also doesn't see used-house prices rising much,
either, at least for the next 12 to 18 months.
Doreen Woo Ho, president of Wells Fargo's consumer
credit group, says she expects a boomlet in home improvement spending
as homeowners decide to keep their houses and wait for values to
climb again. In the past couple of years there has been a trend
of homeowners refinancing their mortgages to pay off home equity
loans. That might change, as people take out home equity loans and
credit lines to pay for improvements, she says.
She adds that many builders are willing to "sweeten
the deal" to get houses sold. Builders are trying not to reduce
prices. Instead, they first offer free or reduced-priced upgrades
in building materials and amenities or offer to pay closing costs
on the mortgage.
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