In this week’s Mortgage Interest Rate Survey, Frank Nothaft, Freddie Mac vice president and chief economist said, “October’s consumer confidence fell to its lowest level since October 2005 as mortgage rates continued to decline this week to their lowest level in almost six months. Continued market concerns about weaker economic growth and further declines in the housing market have kept mortgage rates low over the last few weeks.”
Freddie Mac released its November 1, 2007 weekly results of the Primary Mortgage Market Survey� (PMMS�), with interest rates dropping again this week for the following programs:
* 30-year fixed-rate mortgage (FRM) averaged 6.26 percent with an average 0.4 point for the week ending November 1st, lower again from last week when it averaged 6.33 percent. Last year at this time, the 30-year FRM averaged 6.31 percent.
* The 15-year FRM this week averaged 5.91 percent with an average 0.4 point, down as well from last week when it averaged 5.99 percent. A year ago, the 15-year FRM averaged 6.02 percent.
* Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.98 percent this week, with an average 0.4 point, down slightly from last week when it averaged 6.03 percent. A year ago, the 5-year ARM averaged 6.05 percent.
* One-year Treasury-indexed ARMs dropped from 5.66 percent to 5.57 percent this week with an average 0.6 point. At this time last year, the 1-year ARM averaged 5.53 percent.
Frank Nothaft also noted that, “Although the third quarter gain in real gross domestic product (GDP) of 3.9 percent was stronger than market forecasts, the housing market has subtracted from GDP growth over the past twenty-one months ending in September. In its most recent policy announcement, the Federal Open Market Committee (FOMC) noted that the rate of expansion in the economy will most likely slow in the near term, due in part to a reflection of the intensity of the housing correction.”
Rates haven’t been this low for nearly 6 months, when comparable rates were 6.21 for the 30-year FRM (May 17, 2007), 5.87 for the 15-year FRM (May 10, 2007), 5.92 for the 5-year ARM (May 17, 2007), and 5.57 for the 1-year ARM (May 31, 2007).
Interest rates started the year about 6.18% for the 30-yr FRM, and stayed low until mid-May when it started inching up to a high of 6.73 in mid-June and mid-July. Rates dropped again to a low of 6.31 by mid-September, but have increased slightly to 6.4 after the Fed’s cut in the Federal Funds rate from 5.25 to 4.75 on September 18th. Freddie Mac’s Compilation of Weekly Surveys shows the trend.
According to Lou Barnes of Boulder West Mortgage Credit News in his weekly commentary on the mortgage market, he believes that “credit losses are systemic and too large to recognize.” The struggle has been the strength of the economy – October payroll surprised again by growing 160,000 – and what to do to resolve the credit situation. “The good news: lower mortgage rates will put a mattress under Bubble Zone housing, and help housing in the rest of the country to lead a recovery.”