By Truman Lewis
ConsumerAffairs.com
January 18, 2008
In what may be a glimmer of hope for the moribund housing market, 30-year and 15-year fixed-rate mortgages have fallen to their lowest levels since July 2005.
According to the Freddie Mac Primary Mortgage Market Survey, the 30-year loan averaged 5.69 percent this week, with an average 0.5 point. A week ago, it averaged 5.87 percent and last year at this time, the 30-year FRM averaged 6.23 percent.
The rate on the 15-year mortgage averaged 5.21 percent with an average 0.4 point, down from last week when it averaged 5.43 percent. A year ago at this time, the 15-year FRM averaged 5.98 percent.
While that does nothing for subprime borrowers, it means that those with good credit ratings should be able to get more house for their money, benefiting both from slumping housing prices and cheap mortgage rates.
It also offers an opportunity for homeowners with good credit to refinance and take advantage of the low rates.
Not surprisingly, U.S. mortgage applications surged last week, hitting levels not seen since four years ago.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended January 11 surged 28.4 percent to 906.4, its highest since the week ended April 2, 2004.
The low mortgage rates are largely a reflection of slowing activity in the U.S. economy, said Frank Nothaft, Freddie Mac vice president and chief economist.
The latest retail sales report indicated that shoppers scaled back spending in December, as retail sales declined by 0.4 percent from Novembers level, he said. Particularly weak were sales of building materials, garden equipment and supply stores, which fell by 2.9 percent from the previous month. The declines aggravated concerns about the well being of the economy and exerted downward pressure on mortgage rates.
Mortgage rates moved down across loan products for the third consecutive week. Average rates on 30-year fixed-rate mortgages (FRMs) and 15-year FRMs are at their lowest since July 2005, said Nothaft. The results from this weeks survey mark the first time in seven years that the average rate on the 15-year FRM is lower than the average rate on 1-year adjustable-rate mortgages.
The rate on the 15-year mortgage averaged 5.21 percent with an average 0.4 point, down from last week when it averaged 5.43 percent. A year ago at this time, the 15-year FRM averaged 5.98 percent.
