Rates fall near record low

Mortgage rates slipped back near record lows this week.

Mortgage rates for September 15, 2010

The benchmark 30-year fixed-rate mortgage fell 4 basis points this week, to 4.54 percent, according to the national survey of large lenders. A basis point is one-hundredth of 1 percentage point. This week's reading is just 1 basis point above the all-time Bankrate low.

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 5.38 percent; four weeks ago, it was 4.63 percent.

The benchmark 15-year fixed-rate mortgage fell 6 basis points, to a record low of 4 percent. The benchmark 5/1 adjustable-rate mortgage plunged 13 basis points, to 3.78 percent, another record low.

Mixed picture

Low mortgage rates continue to lure some people into applying for mortgages, but enthusiasm remains tepid at best. The four-week moving average for mortgage purchase applications is up just 2 percent on a seasonally adjusted basis, according to the Mortgage Bankers Association. Meanwhile, refinance mortgage applications have actually fallen 1.4 percent in the past four weeks despite near-record-low rates.


Weekly national mortgage survey

Results of's Sept. 15, 2010, 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:4.54%4%3.78%
Change from last week:-0.04-0.06-0.13
Monthly payment:$839.96$1,220.49$766.95
Change from last week:-$3.93-$4.96-$12.25

Chris Sipe, senior loan officer at Embrace Home Loans in Frederick, Md., says activity in his market is "not great, not terrible." He has a theory about why borrowers aren't more enthusiastic right now. "I have asked many people in and out of the industry why they think more people aren't buying with rates this low," he says. "Most of the answers point back to one thing: a lack of confidence."

Fear of the future

Fear appears to be keeping some potential homebuyers on the sidelines, Sipe says. "People are afraid of what the future holds and are reluctant to make big or unnecessary changes in the face of that uncertainty," he says.

Dick Lepre, senior loan officer at RPM Mortgage in San Francisco, agrees that "fear, uncertainty and doubt" fill the minds of today's consumers.

Refinancing activity is up in the Bay area, says Lepre. But many borrowers can't get new loans because they've lost a job or have seen their home's market value decline sharply.

In addition, lenders now are demanding more extensive income documentation from mortgage applicants, causing some homeowners to decide "it's not worth the trouble" to refinance.

Home shoppers also are biding their time.

"There is no longer that 2005 feeling that 'If I don't buy now, I will never be able to afford a home with prices rising 15 percent each year,'" Lepre says. Flat or falling home values and concerns about employment mean consumers "are, rightfully, cautious," he says.

Queen City rebound

On the other hand, Dan Green says mortgage activity has picked up steam in Cincinnati, where he is a loan officer for Waterstone Mortgage.

"The market is good, and getting better," says Green, who is also the author of

In particular, Green says refinance activity has boomed for several months. In fact, lenders are so busy that new mortgages are likely to languish in the pipeline before they are approved, he says.

"Underwriters are backed up like Lucy and Ethel in the chocolate factory," Green says. He credits government incentives -- such as the Home Affordable Refinance Program, or HARP -- for helping spur activity, saying "not every program works as planned, but they still work." Stabilization of mortgage guidelines also has given borrowers "a clear target" and helped remove uncertainty.

"It makes the mortgage experience a lot less stressful," he says.

Watching the economy

Looking forward, Lepre believes the overall health of the mortgage market largely will depend on whether the wider economy improves or stumbles again.

"The underlying problem is the unemployment rate," Lepre says. "The consumer reacts to that."

Sipe worries the so-called "shadow inventory" of distressed properties on lenders' books could eventually lead to a "further saturation of an already oversaturated market" that will send today's falling prices even lower. "I would hope for stability more than anything, but would not be surprised if we continued to see deterioration," he says.


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