Interest Rate Roundup for June 2, 2011

Interest Rate Roundup
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  • 4.69% (30-year fixed)
  • 0.39 (average points)

Here's a look at the state of mortgage rates from's weekly national survey of large banks and thrifts conducted June 1, 2011.

With yields on Treasury securities continuing to decline along with the housing market, mortgage rates fell in the latest Bankrate survey for the eighth straight week, with a benchmark adjustable mortgage hitting a record low.

The average rate on a 30-year fixed-rate mortgage inched downward to 4.69 percent, a drop of 6 basis points from last week's 4.75 percent. A basis point is one-hundredth of 1 percentage point.

The popular 15-year fixed-rate mortgage also declined, dropping 5 basis points to 3.88 percent. Another fixed-rate product, the 30-year jumbo mortgage, averaged 5.16 percent, also off 5 basis points. Jumbo mortgages are generally those for more than $417,000.

Adjustable mortgages receded as well, with the 5/1 ARM settling at 3.39 percent, compared to 3.45 percent a week earlier. With a 5/1 ARM, the mortgage rate is fixed for the first five years and adjusted annually each year thereafter. This week's figure represented a new record low.

The declining mortgage rates are mirrored in falling interest rates on Federal Treasury securities. During the month of May, the yield on 10-year Treasuries declined from 3.31 percent to 3.05 percent, according to figures from the Federal Reserve. The yield on 20-year Treasuries dipped to 3.91 percent at the end of May compared to 4.14 percent at the start of the month.

Investors have been flocking to Treasuries, which are considered extraordinarily safe, as a safe harbor from the economic upheavals in the so-called eurozone, and as an alternative to stocks, which have been declining amid signs of lingering U.S. economic weakness.

This has pushed the prices of Treasuries higher, and thus yields, which move inversely to price, have dropped. Mortgage rates typically move in a similar direction to the Treasury market.

Mortgage rates are also heavily influenced by market conditions and competition among lenders. However, the newest Standard & Poor's/Case-Shiller Home Price indexes showed housing prices continuing to fall across the country. The widely watched survey is seen as a barometer of the housing industry's vitality.

In the latest reading, for the month of March, Case-Shiller found home price declines have completely erased gains from a brief rebound that occurred from 2009 to 2010. Nationally, housing prices at the end of the first quarter were lower than at any time since mid-2002.

"This month's report is marked by the confirmation of a double-dip in home prices across much of the nation," David Blitzer, chairman of the index committee at S&P, said in a prepared statement. "Home prices continue on their downward spiral with no relief in sight."

Find out what your monthly mortgage payment could be using Bankrate's mortgage calculator.

-- Gregg Fields




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