Rates fall for third week in a row
By Holden Lewis • Bankrate.com

Mortgage rates fell for the third week in a row, and the fourth time in five weeks, as the economy settled uncomfortably into its recession.

The benchmark 30-year fixed-rate mortgage fell 6 basis points, to 6.33 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 6.29 percent; four weeks ago, it was 6.32 percent.

The benchmark 15-year fixed-rate mortgage fell 7 basis points, to 6.01 percent. The benchmark 5/1 adjustable-rate mortgage fell 24 basis points, to 6.18 percent.

Weekly national mortgage survey

Results of Bankrate.com's Nov. 19, 2008, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:

Recessions often are accompanied by falling interest rates, and the signals of a recession were loud and clear this week. The Consumer Price Index fell 1 percent in October, the Labor Department announced Wednesday. The unusually large drop in the price index was attributed mostly to falling gasoline prices. But the core CPI, which excludes food and energy, fell 0.1 percent in October.

That drop in the core CPI number reflects ominous happenings in the economy. The price index for used cars and trucks fell 2.4 percent in October, and the price index for new vehicles fell 0.5 percent -- a sign that shoppers are staying away from car lots. The price index for clothing fell 1 percent. Even toy prices fell -- by 0.5 percent -- just two months before Christmas.

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This turn of events was not lost on the Federal Reserve when its rate-setting committee met in late October. "Spending on consumer durables, such as automobiles, and discretionary items had been particularly hard hit, and retailers anticipated very weak holiday spending," the minutes of the Fed's meeting read.

Fed members heard a bearish economic forecast. The central bank's staff economists lowered their projections for economic activity for the second half of this year as well as for 2009 and 2010. They hypothesized that a recession began in the third quarter of this year, and predicted that it would continue through the first half of 2009. In its understated way, the Fed was predicting a yearlong recession.

The picture looks brighter for 2010, when the Fed expects the economy to start expanding again and for "the contraction in the housing market to come to an end." While that's a modestly hopeful forecast -- at least it sees a light at the end of the tunnel -- it's also a prediction that the housing market won't recover in 2009.