October 14, 2005
The cost of financing a home continues to drift higher, with the average mortgage rate now above the landmark six percent level. A survey of mortgage bankers by Freddie Mac put the average 30 year, fixed rate mortgage at 6.03 percent last week. The average 15 year, fixed rate mortgage remains below six percent.
Last year at this time, the 30-year fixed rate mortgage averaged 5.74 percent. This is the highest the 30-year rate has been since March 31 when it averaged 6.04 percent.
The average for the 15-year fixed rate mortgage is 5.62 percent, with an average 0.6 point, up from last week when it averaged 5.54 percent. A year ago, the 15-year rate averaged 5.14 percent.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.57 percent this week, with an average 0.7 point, up from last week when it averaged 5.48 percent. There is no annual historical information for last year since Freddie Mac only began tracking this mortgage rate at the start of this year.
"In spite of the job losses caused by Hurricanes Katrina and Rita, the employment report was better than had been expected," said Frank Nothaft, Freddie Mac vice president and chief economist.
"This indicates that economic growth is likely to accelerate in 2006. That acceleration of growth, coupled with the specter of higher energy costs, will translate into higher long-term mortgage rates in the coming months. Mortgage rates are projected to rise gradually over the next year, with the 30-year FRM expected to hover around six percent through 2005, and reach 6.4 percent by 2006.
What does that mean for home sales and, more importantly, values? Realtors report home sales should remain strong into 2006, but see a slowing in the pace. Instead of homes selling in two weeks, as they have in many markets, they are likely to sit on the market for longer periods, according to realtors.
Nothafts projection of six percent mortgage rates still low by historical standards should translate into slightly weaker housing demand. That in turn, he says, should take some of the air out of the housing bubble.
