mortgage

Mortgage rates rise for 3rd week

Mortgage rates rose for the third week in a row, amid evidence that house prices could be making a turnaround. Maybe.

The benchmark 30-year, fixed-rate mortgage rose 1 basis point to 5.35 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 0.37 discount and origination points. One year ago, the mortgage index was 6.77 percent (the highest rate of 2008); four weeks ago, it was 5.25 percent.

The benchmark 15-year, fixed-rate mortgage rose 2 basis points to 4.74 percent. The benchmark 5/1 adjustable-rate mortgage dipped 5 basis points to 4.64 percent.

Although the 30-year fixed has gone up three consecutive weeks, the increases haven't been much. It's probably not a coincidence that mortgage applications have fallen during that time, especially for refinances. The Mortgage Bankers Association says applications have fallen more than 25 percent in the past two weeks.

Weekly national mortgage survey
Results of Bankrate.com's Oct. 28, 2009, 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:5.35%4.74%4.64%
Change from last week:+0.01+0.02-0.05
Monthly payment:$921.38$1,282.57$849.81
Change from last week:+$1.02+$1.70-$4.95

Falling loan applications are unwelcome news for Realtors and policymakers who want to encourage people to buy houses. The past week saw several reports on home prices and home sales. The news was mixed, but seemed to point toward signs of recovery.

The National Association of Realtors says that home resales increased by 9.4 percent in September over the previous month, and increased by 9.2 percent compared with September 2008. It was the briskest sales pace since July 2007. The Realtors' chief economist, Lawrence Yun, attributed the sales increase to the first-time homebuyer tax credit, due to expire at the end of November.

First-timers tend to buy inexpensive houses, so there's little surprise that prices on resold homes dropped in September. Half the homes bought in September cost less than $174,900 -- an 8.5 percent decrease compared with the median price of $191,200 in September 2008.

How many houses for sale?

Sales were up and prices were down. The tiebreaker is supply. Based on September's sales pace, there were 7.8 months' worth of houses on the resale market. That's an improvement over August's supply of 9.3 months of houses on the market.

The much-watched S&P/Case-Shiller home price index came out this week, too, and told a different story on prices. It showed an increase in home prices in August compared with July. The rise wasn't much -- just 1 percent, seasonally adjusted. And it showed a year-over-year price drop of 11.3 percent in its composite of home prices in 20 large metro areas. But the pace of the price decreases is slowing down.

"These are strong numbers, but not surprisingly strong numbers," says Susan Wachter, professor of real estate at the University of Pennsylvania's Wharton School of business. "It reflects the recovery which is upon us."

She believes that this is not a false bottom, and that "the fundamentals are in place for a recovery -- however, a slow recovery." It's contingent on continued low mortgage rates and avoidance of a double-dip recession.

Falling inventories mixed news on prices: "This information is extremely relevant for the rent-buy decision," Wachter says. "For renters sitting on the sidelines right now, waiting and wondering when they can be buyers, this is a time that they are likely considering coming into the market."

The Census Bureau's report on new home sales in September came out this week, too. It showed a 3.6 decline in sales from August to September, which surprised many analysts. But the bureau's margin of error is plus or minus 10.2 percent, which means that the decline might have been worse, or that there might even have been a modest increase in sales.

If you're in the market for a mortgage or refinance, you can look for the best interest rate by searching Bankrate's rate tables.

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