Are Mortgage Rates Bottoming Out?

May 27, 2011 (Chris Moore)

Freddie Mac released the results of its Primary Mortgage Market Survey® (PMMS®), which shows fixed rate mortgages declining slightly from the previous week, while rates for adjustable rate mortgages (ARM) climbed higher . With the landmark 30 year fixed rate mortgage only dropping 2 basis points this week and two basis points last week, and with the Mortgage Bankers Association (MBA) and LendingTree reporting slight mortgage rate increases in their reports this week, if you’re sitting on the fence thinking of refinancing or purchasing, now might be a good time.

According to Freddie Mac, the 30-year fixed-rate mortgage (FRM) averaged 4.61 percent with an average 0.7 point for the week ending May 19, 2011, down from last week when it averaged 4.63 percent. Last year at this time, the 30-year FRM averaged 4.84 percent. The 15-year FRM this week averaged 3.80 percent with an average 0.7 point, down from last week when it averaged 3.82 percent. A year ago at this time, the 15-year FRM averaged 4.24 percent.

Adjustable rate mortgage rates, on the other hand, showed rate increases this week as the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.48 percent this week, with an average 0.6 point, up from last week when it averaged 3.41 percent. A year ago, the 5-year ARM averaged 3.91 percent. The 1-year Treasury-indexed ARM averaged 3.15 percent this week with an average 0.6 point, up from last week when it averaged 3.11 percent. At this time last year, the 1-year ARM averaged 4.00 percent.

Frank Nothaft, vice president and chief economist of Freddie Mac stated, “Fixed mortgage rates inched down for the fifth consecutive week as financial markets try to ascertain the current strength of the economy. Industrial production was unchanged in April owing to disruptions in automobile parts supplies due to the earthquake and tsunami in Japan. Netting out automobiles and gasoline, retail sales rose 0.2 percent in April, which was less than a third of the increase in March and the weakest growth since December 2010. However, consumer confidence, as measured by the University of Michigan, rose above the market consensus in May to the highest reading since February.”

Although a weakening economy is not good for Americans, historically it’s good for mortgage interest rates. But historically mortgage interest rate predicting has been a bad profession to be in.

In their weekly reports this week, the MBA reported a mixed bag on interest rates as the effective rate of the 30 year FRM was slightly higher while the 15 year FRM’s effective rate was slightly lower. LendingTree reported slightly higher interest rates across the board in their weekly Mortgage Pulse Rate report.

Nothaft added, “Data on the housing market was also mixed. New construction on single-family homes fell 5.1 percent in April, with the largest declines occurring in the Midwest and South regions where tornados hit the hardest. Homebuilder confidence remained unchanged in May and near its January 2009 historical low, according to the NAHB/Wells Fargo Housing Market Index. However, conventional mortgages applications rose for the past five straight weeks ending May 13th, buoyed by lower mortgage rates and stronger refinancing activity.”

Interest rates are at the lowest levels seen in 2011, and with mixed economic activity, are likely to be up and down slightly each week until financial markets can better ascertain the current strength of the economy.

Might be a good time to get off that fence though.

Tags: 15 year fixed, 30 year fixed, fixed rate mortgage, freddie mac, interest rates, mortgage rates

Sources:
Freddie Mac
LoanRateUpdate
LoanRateUpdate

30-Year Fixed Rate Mortgages US NE SE NC SW W
Average 4.60 4.60 4.62 4.63 4.65 4.54
Fees & Points 0.7 0.7 0.9 0.6 0.6 0.8

15-Year Fixed Rate Mortgages US NE SE NC SW W
Average 3.78 3.80 3.79 3.82 3.85 3.71
Fees & Points 0.7 0.7 0.9 0.5 0.6 0.8

5/1-Year Adjustable Rate Mortgages US NE SE NC SW W
Average 3.41 3.57 3.40 3.45 3.46 3.24
Fees & Points 0.5 0.5 0.7 0.4 0.5 0.6
Margin 2.74 2.74 2.75 2.74 2.76 2.73

1-Year Adjustable Rate Mortgages US NE SE NC SW W
Average 3.11 3.26 2.88 3.52 3.00 2.87
Fees & Points 0.5 0.6 0.5 0.3 0.8 0.5
Margin 2.76 2.80 2.75 2.73 2.77 2.75

The National Mortgage Rate Snapshot One Year Ago One Week Ago
  30-YR 15-YR 5/1-YR 1-YR ARM 30-YR 15-YR 5/1-YR 1-YR ARM
Average 4.78   4.21   3.97   3.95   4.61   3.80   3.48   3.15  
Fees & Points 0.7   0.7   0.7   0.6   0.7   0.7   0.6   0.6  
Margin N/A N/A 2.75   2.75   N/A N/A 2.74   2.76