Rates on 30-year mortgages drop
WASHINGTON—Rates on 30-year mortgages edged down slightly this week, staying below 6 percent, although rates on other types of mortgages rose.
Rates on 30-year mortgages dropped below the 6 percent threshold in the second week of January and stayed there for six straight weeks as the sharp economic slowdown stirred concerns about a possible recession. But then rates began rising as bond investors became worried about increased inflation, hitting a high for this year of 6.24 percent the week of Feb. 28.
The meltdown of Bear Stearns, the nation's fifth-largest investment bank, prompted the Federal Reserve to move aggressively to pump money into the financial system and slash a key lending rate by three-quarters point on March 18.
Analysts said all of these Fed efforts had helped to ease pressure on interest rates that had been generated by the higher inflation readings. Also contributing were further weak readings on the economy, with the Index of Leading Economic Indicators falling for a fifth straight month and consumer confidence dropping to a five-year low.
"Long-term mortgage rates were mixed, but relatively unchanged in the past week as the latest economic indicators came in much as expected," said Frank Nothaft, chief economist at Freddie Mac.
Outside of 30-year mortgages, rates on other mortgage categories posted slight increases.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose to 5.34 percent this week, up from 5.27 percent last week.
For five-year, adjustable-rate mortgages, rates rose to 5.67 percent, up from 5.56 percent last week.
Rates on one-year, adjustable-rate mortgages increased to 5.24 percent, up from 5.15 percent last week.
The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages, the nationwide average fee was 0.4 point. Five-year mortgages carried a 0.6 point average fee while one-year mortgages had a 0.5 point average.
A year ago, rates on 30-year mortgages stood at 6.16 percent, 15-year mortgage rates averaged 5.86 percent, five-year adjustable-rate mortgages were 5.88 percent and one-year adjustable-rate mortgages were at 5.43 percent.
Housing has been suffering through a severe slump that has dragged down house prices in many parts of the country. The fallout is hitting both homeowners and the economy at large, raising worries about a possible recession.
"We are in the midst of a slump and we still have a ways to go," Lynch said. "Our price forecast shows that median prices won't bottom until mid-2009."
This article appeared in the Lowell Sun on Wednesday, March 27, 2008