Mortgage rates fall again
The past year has seen mortgage rates steadily climb, which has been a contributing factor for the decline in home sales and mortgage originations.
Well, now there’s finally some good news for everyone. The interest rates on mortgages dropped last week, again!
A staff reporter for The Wall Street Journal explains the details of this rate drop, in the September 1, 2006 article, “Home Mortgage Rates Drop Across the Board.”
A mortgage rate decrease is much needed for all aspects of the real estate market. Lower rates will result in more loan originations, which in turn, means that more homes will be sold.
“Home mortgage rates fell across the board this week, on the heels of sluggish housing data and cooling consumer confidence, housing-finance agency Freddie Mac said.”
Mortgage originations are important to mortgage companies and banks but consumer confidence, or moral, is what they focus on. The moral indicates future trends. If moral is up, loans should originate; if moral is down, so too will be loan sales.
“The average for 30-year fixed mortgage rates for the week ended yesterday was 6.44%, down from 6.48% a week earlier, Freddie Mac said in its weekly primary mortgage market survey. One year ago, the rate averaged 5.71%.”
Mortgage rates reached 6.8 percent for a 30-year fixed rate in the last week of July. Rates were originally expected to rise well over 7 percent by August, but instead rates have been dropping.
“The average for 15-year fixed-rate mortgages this week was 6.14%, down from 6.18% one week ago. A year earlier, the mortgage averaged 5.32%.”
“The average for five-year Treasury-indexed hybrid adjustable-rate mortgages, was 6.11%, down from 6.14% one week ago but up from the year-earlier 5.30%.”
“The average rate for one-year Treasury-indexed ARMs was 5.59%, down slightly from 5.60% one week ago but up from the year-ago 4.48%.”
These new figures represent that consumers are gaining confidence in mortgages and the market in general, although there is much more improvement to be done.
Why for the sudden change in mortgage rates? Newspaper headlines and articles all predicted the rates to climb over 7 percent by the year’s end.
“‘Mortgage rates continued to drift lower this week in part because of the cooling in the housing market and in consumer confidence, thus giving financial markets a reason to believe that economic growth will moderate and inflation will remain in check,’ said Frank Nothaft, Freddie Mac vice president and chief economist. ‘As a matter of fact, the 30-year fixed-rate mortgage is nearly 40 basis points lower,’ or 0.40 percentage point lower, than its peak this year of 6.8% in July, he said.”
Consumer confidence also helps the economy. The less negative people are, the more profit businesses (including mortgage originators) will generate.