Mortgage Rates Fall to Five-Month Low

Slower economic growth and the Fed hitting the pause button have helped bring fixed mortgage rates to a five-month low.

RISMEDIA, August 25, 2006—Mortgage rates declined for the seventh time in the last eight weeks, aided by last week's better-than- expected reading on the Consumer Price Index. The average 30-year fixed rate mortgage fell to 6.48%, the lowest since March 29. According to Bankrate.com's weekly national survey of large lenders, the 30-year fixed rate mortgages had an average of 0.32 discount and origination points. The average 15-year fixed rate mortgage, popular for refinancing, dropped by a similar amount to 6.19%. On larger loans, the average jumbo 30- year fixed rate declined to 6.74%, Adjustable rate mortgages also backtracked. The average 5/1 adjustable rate mortgage slid to 6.24%, and the average one-year ARM retreated to 6.00%. Although inflation remains a threat, bond investors are confident in the Fed's forecast that inflation will recede as the economy cools. Bond yields and fixed mortgage rates both reflect some concern on the part of investors that the economy will slow too much, causing the Fed to cut rates at a later date. Fixed mortgage rates are closely related to yields on long-term government bonds. Fixed mortgage rates have fallen nearly one-half of a percentage point since the Fed last hiked rates at the end of June. At the time, the average 30-year fixed mortgage rate was 6.93%, meaning that the monthly payment on a loan of $165,000 was $1,090. With the average 30-year fixed rate now 6.48%, the same loan originated today would carry a monthly payment of $1,040.74. With the recent pullback, fixed mortgage rates remain an attractive refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.