Mortgages
- 4.69% (30-year fixed)
- 0.36 (average points)
With a very weak unemployment report pointing to potentially prolonged paralysis in the U.S. economy, mortgage rates slid as the economic gloom deepened.
The 30-year fixed-rate mortgage slipped to 4.69 percent from 4.79 percent last week, a decline of 10 basis points. A basis point is one-hundredth of 1 percentage point.
The 15-year fixed-rate mortgage followed a similar path, dropping 8 basis points to 3.82 percent from 3.9 percent. Another fixed-rate mortgage product, jumbo home loans, declined 7 basis points to 5.2 percent. Jumbo loans are generally those for more than $417,000.
Adjustable-rate mortgages also sank, with the popular 5/1 ARM settling at 3.4 percent from 3.49 percent last week. With a 5/1 ARM, the rate is fixed for the first five years and adjusted annually thereafter.
The size of the rate changes may have been due partly to a change in the survey sample.
However, the weakening of mortgage rates dovetailed with a series of economic reports that suggested the recovery from recession has stalled, at least in terms of hiring. Last week, the government reported that only 18,000 jobs were created in the U.S. in June, a figure so small that it couldn't prevent the unemployment rate from rising to 9.2 percent from 9.1 percent.
Mortgage rates are also heavily influenced by activity in the market for U.S. Treasury securities. Financial markets have been transfixed on the possibility of a federal default if Congress and the White House fail to agree to raise the government's debt ceiling by Aug. 2.
Nevertheless, Treasury prices have risen in the last week, in part because U.S. fiscal problems, daunting as they are, have been viewed as less threatening than those facing the eurozone. As a result, Treasury yields, which move inversely to price, have been falling. Generally, mortgage rates move in the same direction as Treasury yields.
In addition to interest rates on Treasuries, mortgage rates are influenced by market demand and lender competition. However, in Congressional testimony Wednesday, Federal Reserve Chairman Ben Bernanke seemed to banish any notion that vigor will return soon to the housing market.
Speaking to the House Committee on Financial Services, Bernanke said a lack of access to credit and unstable home prices are muzzling any housing rebound. "The demand for homes has been depressed by many of the same factors that have held down consumer spending more generally, including the slowness of the recovery in jobs and income as well as poor consumer sentiment," Bernanke said.