Rates Reflect On-Going Housing and Economic Woes

Mortgage rates declined for the second straight week according to the results of the Primary Mortgage Market Survey for the week ended February 19 and released by Freddie Mac this morning.  Both long- and short-term rates fell a minimum of 12 basis points.

The 30-year fixed-rate mortgage (FRM) averaged 5.04 percent for the week compared to 5.16 a week earlier.  Fees and points remained unchanged at 0.7 point.

The 15-year FRM had an average rate of 4.68 percent for the week, down 13 basis points from the week ended February 12.  Fees and point averaged 0.6 point compared to 0.7 point the previous week.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) had an average rate of 5.04 percent with 0.6 point.  A week earlier the rate was 5.23 percent, also with 0.6 point

One-year Treasury-indexed ARMs averaged 4.80 percent this week with an average 0.5 point, down from last week when it was 4.94 percent with 0.5 point.

 Frank Nothaft, Freddie Mac vice president and chief economist said, “Mortgage rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation.  And consumer sentiment fell in February for the first time in three months to near its lowest level since May 1980, while industrial production slowed in January by more than the market consensus.  In addition, the Federal Reserve lowered its growth forecasts for this year during its policy-setting meeting on January 27-28, noting a deeper contraction in the economy as the credit crunch tightens.

“Meanwhile, the housing market is not doing any better.  New housing construction slowed to an all-time record low of 466,000 homes (annualized) in January since records began in January 1959.  And although homebuilder confidence ticked up in February from a record low, builder expectations of sales over the next six months hit a record low since it was first published in January 1985.”

Fannie Mae’s yields, which do not include servicing fees, also fell during the week ended February 13 from those a week earlier.  The conventional 30-year FRM averaged 4.59 percent compared to 4.73 percent for the week ended February 6.  The 15-year FRM had an average yield of 4.150 percent against 4.24 percent the week before.  Government guaranteed FHA/VA 30-year mortgages fell from 6.230 to 6.180 percent.  The one-year ARM was also down to 4.44 percent from 4.58 percent.  Weekly yield information was released on Tuesday by Fannie Mae.