Earlier this week, rates on 30-year mortgages had not budged, and rates on other mortgage products also displayed little change. On Thursday, mortgage company Freddie Mac reported the same percentage average this week- 6.40%- for fixed-rate mortgages as it was the previous week. In mid-September, the national average for 30-year mortgages had fell to 6.31%, the lowest point since mid-May, but has since been on an upward trajectory, for the most part. Economists point to mixed economic indicators in their analysis of the mortgage rates' stagnant pattern this week. Frank Nothaft, Freddie Mac's president and chief economist explained that although "retail sales were strong in September, consumer confidence fell below market expectations in October". He further added that "both the core consumer price index and producer prices for September remained contained."
In their speeches this week, Federal Reserve Chairman Ben Bernanke and Secretary of the Treasury Henry Paulson forewarned that the momentous housing downturn might last longer than anticipated. This September and for the first time in four years, the Feds cut interest rates. If the economic data shows signs of further weakening, economists project that the Central Bank will reduce rates again when it meets on October 30-31. This week, the Department of Commerce reported that in September, new home construction posted a 14-year low.
Rates on consumers' top choice for mortgage refinancing- namely the 15-year fixed-rate mortgage (FRM)- posted a 6.08% average this week (with an average 0.6 point), increasing only slightly from the previous week's average of 6.06 percent. For home mortgage refinancing involving five-year treasury-indexed hybrid adjustable-rate mortgages (ARMs), this week's rates averaged 6.11 percent (with an average 0.5 point), almost unchanged from last week's rates which averaged 6.12 percent. For Americans who chose to mortgage refinance with a one-year treasury-indexed ARM, rates edged up from 5.73 percent last week to 5.76 percent (with an average 0.6 point) this week.
To obtain the total cost of acquiring the mortgage for refinancing or other purposes, it is necessary to report the average commitment rate, along with average points and fees. This is because add-on fees, better known as points, are not included in mortgage rates. The national average fee posted by five-year ARMs and thirty-year mortgages was 0.5 point. Other mortgage refinancing products, such as the one-year ARM and the 15-year mortgage, carried a fee of 0.6 point. Last year, one-year ARMS stood at 5.57 percent, five-year ARMS averaged 6.11 percent, 15-year mortgages were at 6.06 percent, and 30-year mortgages posted a 6.36 percent average.
In the last few months, the worst real estate slump in 16 years further deteriorated with the increase in home mortgage defaults. The latter has been triggered by a difficulty on the part of many homeowners to make the higher payments resulting from a home refinance via a low introductory ARM reset to a higher rate. Nothaft stated as follows: "In his October 15th speech, Fed Chairman Bernanke suggested housing would be a 'significant drag' on the economy going into the next year. Indeed, inventories of unsold homes remained exceptionally high. And October's homebuilder confidence fell to the lowest level since 1985, when record keeping began."