Mortgage Rates at Six-Week Low

By:: Kara Johnson | May 06, 2010

Mortgage rates fell again this past week, with 30-year fixed rate loans averaging an even 5.0 percent, according to the newest Freddie Mac weekly rate survey.

The 30-year rate was down from 5.06 percent last week. Rates have now declined or held steady for four consecutive weeks after briefly spiking in the first week of April after the Federal Reserve ended its program of purchasing mortgage backed securities.

Initial interest rates on the five-year Treasury-indexed adjustable rate mortgage (ARM) fell to an all-time low, averaging 3.97 percent, down from 4.00 percent last week. It’s the lowest the initial rate has been since Freddie Mac began tracking the five-year ARM in 2005.

Average rates on 15-year fixed-rate mortgages declined to 4.36 percent, down from 4.39 percent the week before. All three loan types were based an average 0.7 discount points paid. The 30- and 15-year loans are at their lowest point in six weeks.

Freddie Mac chief economist Frank Nothaft attributed the decline to lower rates on Treasury bonds and note yields this past week, with mortgage rates following suit.

Except for the sharp spike in the first week of April, mortgage rates have remained stable following the end of the Federal Reserve’s purchases of mortgage securities at the end of March. That program was credited with sending mortgage interest rates to all-time lows in 2009 and there were widespread expectations that rates would rise once the program ended.

Instead, 30-year rates have continued to hover around the 5 percent mark, as they have done since the first of the year, except for a brief surge to 5.21 percent in the first week of April. Rates on 15-year fixed rate loans and the five-year ARM have actually been trending downward since Jan. 1.

Many analysts continue to forecast that mortgage interest rates will rise this year, now that the Fed’s purchases are no longer helping to keep rates down. Many expect that the Fed will actually move to raise interest rates to keep a lid on inflation as the economy recovers, although the most recent Fed statement at the end of April forecast subdued inflationary pressures for the foreseeable future.

The most recent forecast from the Mortgage Bankers Association predicts 30-year mortgage rates will rise to 5.4 percent in the second quarter of 2010, then steadily increase to 6.0 percent in the first quarter of 2011.

The Freddie Mac survey covers the week ending today, May 6.

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Loan Type	Today	+/-
30 yr fixed	3.72
15 yr fixed	3.03
5/1 ARM	2.75

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