mortgage

Mortgage rates sneak below 5 percent

Mortgages rates took a notable dip this week as investors got mixed signals in the uncertain economic climate.

Mortgage rates for April 21, 2011
Find the best mortgage rates in your area.

The benchmark 30-year fixed-rate mortgage fell 11 basis points this week, to 4.96 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 0.44 discount and origination points. One year ago, the mortgage index was 5.35 percent; four weeks ago, it was 5.04 percent.

The benchmark 15-year fixed-rate mortgage dropped 12 basis points, to 4.16 percent. The benchmark 5/1 adjustable-rate mortgage fell 13 basis points, to 3.7 percent.

 

Weekly national mortgage survey

Results of Bankrate.com's April 20, 2011, 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:4.96%4.16%3.70%
Change from last week:-0.11-0.12-0.13
Monthly payment:$881.73$1,233.76$759.47
Change from last week:-$11.10-$10.01-$12.18
What would the monthly payment be for you? Use Bankrate's mortgage calculator to find out.
 

The low rates have surprised some in the mortgage industry, including Rob Nunziata, president of FBC Mortgage in Orlando, Fla.

"We are seeing all the signs of inflationary pressure that will affect rates," he says. "Gas prices are going up, and some foreign countries have raised rates. But I think they are going to stay stable for at least a couple of weeks."

Rising inflation

The Consumer Price Index rose by 0.5 percent in March compared to February, according to the Department of Labor. In February, the index had risen another 0.5 percent from January. Consumer prices have climbed 2.7 percent in the last year.

"Inflation leads to higher mortgage rates," Nunziata says. "If things continue like this, a spike in rates will be inevitable in the next couple of months. I don't think it will be a huge spike though."

U.S. debt warning

Another factor that mortgage experts say could add pressure to interest rates is the rating of the U.S. debt. On Monday, Standard & Poor's changed its outlook on U.S. Treasury bonds from "stable" to "negative" and warned it might downgrade the U.S. debt from its top AAA rating if government officials don't get the country's budget deficit under control.

The threat hasn't caused much panic among investors yet, but a potential downgrade could pull nervous investors from the bond market to invest in the stock market, which would eventually cause a rise in interest rates.

"It remains to be seen what the impact of that would be, but the world needs to see our government can take this deficit seriously and address it in a coherent way," says Steve Majerus, regional vice president of First California Mortgage Co. in Petaluma, Calif. "It is a precursor to rates rising."

Improving job market

But it wasn't all bad news for the U.S. economy this week.

Data released Tuesday by the Department of Labor showed the job market has seen some improvement, which is a sign the economy may be strengthening.

Unemployment rates dropped in 34 states, and 38 states saw job gains in March, according to the department. The rate was unchanged in nine states and Washington, D.C., and rose in seven states.

What's good news for the economy may not be so rosy for the mortgage world.

In theory, a stronger job market reflects a stronger economy that could withstand higher rates. But with more than 14 million people still unemployed, the slight improvement in unemployment figures may not be enough to make a statement yet.

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Product Rate Change Last week
30 year fixed 4.29%  0.01 4.30%
15 year fixed 3.23%  0.06 3.29%
5/1 ARM 3.33%  0.12 3.45%
 
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