Mortgages fall as home prices lose speed

Mortgage rates slipped this week after a slew of economic indicators showed softer demand from homebuyers and a deceleration in housing values. A jobs report later this week could provide even more reason for rates to move.

30 year fixed rate mortgage – 3 month trend
  • The benchmark 30-year fixed-rate mortgage fell to 4.27 percent from 4.3 percent last week, according to the national survey of large lenders. One year ago, that rate was 4.41 percent. Four weeks ago, it was 4.24 percent. The mortgages in this week's survey had an average total of 0.21 discount and origination points. The 30-year fixed is within hailing distance of its lowest level of the year. In Bankrate's Aug. 27 survey, it sank to 4.23 percent. The rate has averaged 4.4 percent over the past 52 weeks.
  • The benchmark 15-year fixed-rate mortgage fell to 3.44 percent from 3.46 percent.
  • The benchmark 5/1 adjustable-rate mortgage fell to 3.29 percent from 3.32 percent.
  • The benchmark 30-year fixed-rate jumbo fell to 4.29 percent from 4.31 percent.

Weekly national mortgage survey

Results of's Oct. 1, 2014, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed15-year fixed5-year ARM
This week's rate:4.273.443.29
Change from last week:-0.03-0.02-0.03
Monthly payment:$813.63$1,174.70$721.72
Change from last week:-$2.91-$1.62-$2.72

"These little moves up and down that we've been seeing are really reflective of the uncertainty over how strong the economy really is," says Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. "There isn't any conviction yet of the direction of the economy."

Housing market pulse

The week provided a less-than-rosy picture of the current housing market. The number of contracts signed to buy previously owned homes decreased in August by 1 percent from July and is 2.2 percent below last year's level, according to the National Association of Realtors report released Sept. 29.

Featured Rates

The Mortgage Bankers Association's report on mortgage volume on Oct. 1 further underscored the slowdown in demand. Refinancing activity fell this week from the previous week and applications for purchases remained unchanged, but well below year-ago levels.

"It's been kind of slow, slower than I'd like it to be," says John Stearns, a senior mortgage banker with American Fidelity Mortgage in Milwaukee. "People you've been following up with have decided to put a purchase off. Even people who could refinance and it's good for them are not doing it."

Home prices rise at a slower pace

The waning buyer interest is affecting home values, too. The widely watched Standard & Poor's/Case-Shiller Home Price Index found that increases in home prices across the country continued to decelerate in July, rising at a 5.6 percent annual rate, compared with 6.2 percent in June. Prices had been experiencing double-digit increases as recently as February.

"The slower pace of home price appreciation is consistent with most of the other housing data on housing starts and home sales," says David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices. "However, home prices continue to rise at two to three times the rate of inflation."

Future factors

Friday's jobs report from the Labor Department could prompt mortgage rates to change. Whether up or down depends on what the numbers show.

"If anything comes out negative, then that's bad for stocks, good for bonds and mortgage rates," says Scott Sheldon, a senior loan officer at Sonoma County Mortgages in California. Mortgage rates tend to track the yield on the 10-year Treasury note.

What about the Fed?

Also still lingering is the Federal Reserve's next moves. Its monetary policymaking arm, the Federal Open Market Committee, is expected to conclude its third round of asset purchases, known as quantitative easing, or QE3, at its October meeting. So far, the incremental cuts in purchases have not affected rates much.

"With QE3 ending later this month, what will happen to rates?" Stearns asks. "Everybody thought rates would be going higher as they reduced purchases. Now there's talk that maybe stocks will take the hit and that will help bonds."

Other activity

Despite the slowdown in regular mortgage financing, Stearns noted an uptick in reverse mortgages. He says he closed several in the past few weeks. In California, Sheldon has noticed a growing appetite for jumbo loans, a mortgage that exceeds the conventional conforming loan limits typically set by Fannie Mae and Freddie Mac.

"There's been an emergence of more jumbo players, so lenders are pricing aggressively to pull out high net worth individuals," he says. "In some cases, jumbo rates are pricing an eighth lower than conventional loans."


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