Mortgage rates inch lower

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Mortgage rates were almost unchanged this week.

The benchmark 30-year fixed-rate mortgage fell 1 basis point, to 5.58 percent, according to the 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 0.41 discount and origination points. One year ago, the mortgage index was 6.42 percent; four weeks ago, it was 5.76 percent.

The benchmark 15-year fixed-rate mortgage was unchanged at 4.93 percent. The benchmark 5/1 adjustable-rate mortgage fell 7 basis points, to 4.98 percent.

As rates held fairly stable, touted a survey that concluded that millions of people are shopping “for bargains in the most affordable housing market in 28 years.”

Weekly national mortgage survey
Results of’s July 15, 2009, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed 15-year fixed 5-year ARM
This week’s rate: 5.58% 4.93% 4.98%
Change from last week: -0.01 N/C -0.07
Monthly payment: $945.15 $1,298.80 $883.74
Change from last week: -$1.04 N/C -$7.06

While people might be shopping, it appears that a lot of them are merely looky-loos. There aren’t many people applying for mortgages to buy homes, according to the Mortgage Bankers Association. The MBA’s purchase index, a measure of the number of people applying for purchase loans, fell 9.4 percent from the previous week.

More significantly, the MBA’s purchase index was down 14 percent from exactly six months before, the second week of January. Early January typically is the slowest time of the year for home sales and early July is the middle of the summer buying season. But fewer people are applying for purchase loans now than during the slow season.

According to the Realtors’ survey, 65 percent of house-shoppers are in the market because of low prices. Some are chasing foreclosures, others think prices have bottomed out and still others want to buy before mortgage rates rise further. While the survey says most shoppers are bargain hunters, it doesn’t say how many would-be buyers there are.

Vicious circle?

Paul Descloux, publisher of Mortgage Maxx, an independent index of mortgage activity, writes in a weekly newsletter that “mortgage activity doesn’t affect supposed nominal affordability. … With one-quarter of all mortgages now underwater and double-digit unemployment approaching, a nasty tipping point may be in the offing.”

Descloux worries that rising unemployment could cause more foreclosures, pushing house prices further downward and tipping more troubled homeowners into foreclosure. The vicious circle of foreclosures and falling prices would be hard to pull out of.

But maybe the vicious circle has been stopped. Integrated Asset Services’ home price index, dubbed IAS360, says prices rose 1.6 percent in May compared with April. It was the second consecutive monthly increase, after a tiny rise in April.

“Two months’ worth of positive data hardly signals a turn in the national housing market,” Dave McCarthy, president and CEO of IAS, said in a news release. “But we have to be encouraged by what we’re seeing in several important counties and neighborhoods.”

Even after the two-month bump in April and May, the IAS360 was still down 10.5 percent this May, compared with the previous May.