Mortage Rates Hold Steady

Mortgage rates held steady this past week, remaining near all-time lows, according to the weekly rate survey from Freddie Mac.

Fixed-rate mortgages were virtually unchanged, with both 30-and 15-year rates moving only a single basis point. In the case of 15-year loans, the average rate declined to 4.20 percent, a new all-time low, with 0.7 points paid.

Rates on 30-year loans edged up to 4.79 percent, from 4.78 percent last week. However, the average points paid increased from 0.7 to 0.8 percent, so the actual cost of those loans rose somewhat more than the change in interest rates alone would indicate.

Interest rates on 5-year Treasury indexed adjustable rate mortgages (ARMs) dropped to an average of 3.94 percent, down from 3.97 percent last week, with an average of 0.7 points paid.

“The economy grew at a slower rate than originally reported in the first three months of the year, according to the Bureau of Economic Analysis, which suggests inflation will remain tame in the near term,” said Frank Nothaft, Freddie Mac vice president and chief economist.  “As a result, mortgage rates held at historic levels this week. In fact, rates on 15-year fixed-rate mortgages set another record low for the third week in a row.

“There are also signs that credit conditions may be improving,” Northaft added. “The number of homeowners with private mortgage insurance who became current on their mortgages outnumbered those who defaulted for the third month in a row in April, according to data compiled by the Mortgage Insurance Companies of America.”

Mortgage interest rates have been generally declining for the past eight weeks now, which has spurred renewed interest in refinancing for homeowners who may have missed out on last year’s low rates. Applications to refinance have been increasing for the past four weeks, according to figures released yesterday by the Mortgage Bankers Association (MBA), but may be peaking as the supply of eligible homeowners decreases. Applications for refinances rose 2.4 percent last week, by far the smallest increase in the past month.

Meanwhile, applications for home purchase mortgage applications declined throughout the month of May, in the wake of the deadline for to sign purchase contracts for the homebuyer tax credit. The MBA says home purchase mortgage applications have declined 40 percent since the expiration of the credit on April 30; homebuyers have until June 30 to close sales qualifying for the credit.

All three mortgage interest rates listed above remain well below their levels of one year ago. The 30-year average rate is a full half percentage point lower than it was one year ago this week, when it averaged 5.29 percent. Interest rates on 15-year loans are down even more, from 4.79 percent one year ago, while average rates on the 5-year ARM are down nearly a full percentage point, from 4.85 percent last year at this time.