Mortgage rates not likely to move higher in near term

By Palm Beach Business.com

DELRAY BEACH — Mortgage rates pretty much sat in neutral this week after making some sharp swings up and down.

Freddie Mac reported Thursday that its Primary Mortgage Market Survey found the 30-year fixed-rate mortgage averaging 5.07 percent with 0.7 point for this week compared to 5.04 percent a week ago. Last year at this time, the 30-year averaged 6.24 percent.

Bankrate.com’s national survey put the 30-year at 5.34 percent, same as a week ago.

"Mortgage rates were little changed this week amid mixed data reports of a slowing economy," Freddie Mac Chief Economist Frank Nothaft said. "Both the core Producer Price and Consumer Price Indexes ticked up in January, higher than the market consensus, while consumer confidence in February fell to the lowest reading since records began in January 1967.

Bankrate, meanwhile, cited President Obama's housing plan and the government’s commitment to keeping mortgage rates low. With recession fears continuing to grip investors, mortgage rates may head lower in the weeks to come.

Other key rates from the Freddie Mac survey:

— The 15-year FRM this week averaged 4.68 percent, unchanged from last week.

— Five-year adjustable-rate mortgages (ARMs) averaged 5.06 percent this week, up from last week’s 5.04 percent.

— One-year ARMs averaged 4.81 percent this week, up from 4.80 percent. At this time last year, the 1-year ARM averaged 5.11 percent.

Bankrate found the average 15-year sinking to 4.93 percent and the average jumbo 30-year fixed rate dipping to 6.92 percent. ARms were mixed, with the average 1-year ARM pulling back to 5.47 percent and the 5/1 ARM holding at 5.37 percent.

While the Obama plan could hold mortgage rates down, Bankrate says there’s still a risk that foreign central banks that buy so much U.S. government debt will turn away amid the surge in issuance by the Treasury. If foreign banks do curtail their purchases, that would drive interest rates higher for government, corporate, and consumer borrowers.

Back in August, the average 30-year fixed mortgage rate was 6.66 percent, meaning a $200,000 loan would have carried a monthly payment of $1,285.25. With the average rate now at 5.34 percent, the monthly payment for the same size loan would be $1,115.58, a savings of $170 per month for a homeowner refinancing now.

In the relative near term, the panelists that make up Bankrate's weekly Rate Trend Index see rates staying put or dropping. Only 18 percent of the panelist see rates rising in the next 30 to 45 days, while 46 percent see further declines and  36 percent see them remaining more or less unchanged.