Mortgage rates fall for 3rd week in a row
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| By Holden Lewis • Bankrate.com |
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Fixed mortgage rates fell for a third week in a row as oil prices dropped.
The benchmark 30-year fixed-rate mortgage fell 5 basis points, to 6.55 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.41 discount and origination points. One year ago, the mortgage index was 6.5 percent; four weeks ago, it was 6.74 percent.
The benchmark 15-year fixed-rate mortgage fell 5 basis points, to 6.09 percent, and the 30-year, fixed-rate jumbo, for larger loans, dropped 9 basis points, to 7.52 percent. The benchmark 5/1 adjustable-rate mortgage went the other way, rising 2 basis points, to 6.29 percent.
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| Weekly
national mortgage survey |
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| This week's rate: |
6.55% |
6.09%
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6.29%
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| Change from last week: |
-0.05 |
-0.05
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+0.02
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| Monthly payment: |
$1,048.34 |
$1,400.40
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$1,020.23
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| Change from last week: |
-$5.45 |
-$4.47
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+$2.15
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It was good news for mortgage shoppers when Hurricane Gustav didn't significantly damage oil and natural gas facilities in the Gulf of Mexico. Most production had been halted just in case, and the federal government pledged to release oil from emergency reserves to cushion the disruption. Oil prices have been on the decline for the last month anyway, as global demand for energy seems to be dropping as a result of the economic slowdown.
Put all those things together and you get falling oil prices. Crude oil for October delivery fell Wednesday to less than $109 a barrel. The price topped out above $145 a barrel about six weeks ago. To the extent that lower oil prices are expected to cool inflation, long-term mortgage rates fall.
Volatility calming
In the last couple of weeks, there's been a remarkable change in
the mortgage market: Rates aren't swinging up and down as much as
they had for most of this year. Especially in the spring, it wasn't
uncommon for rates to bounce like an airplane in a thunderstorm.
They sometimes moved a quarter of a percentage point in just a few
minutes. In business lingo, rates were volatile.
Rates have been calmer for the last week and a half, so fewer borrowers have been receiving urgent phone calls from their mortgage brokers, urging them to lock immediately before rates bounce back up.
A couple of things are going on, explains Barry Habib, publisher of the Mortgage Market Guide, an online information service for people in the industry. First, stock volatility has diminished, too. That reduces surges of money into and out of the bond market that underlies the mortgage market.
Second, Habib says, overall inflation seems to be rising, while oil prices have been falling. "So you have factors that are almost canceling each other out."
Cameron Findlay, economist for LendingTree.com, attributes the calming of the mortgage market partly to smaller swap spreads over the past week and a half. Interest-rate swaps are a hedge that mortgage companies, including Fannie Mae and Freddie Mac, use to protect themselves from interest rate fluctuations. Smaller swap spreads are a sign that mortgage lenders are having a less-difficult time getting money to lend.
For his part, Habib predicts that mortgage rates will continue to fall. This time he believes the trigger will be the August employment report, which will be released Friday morning. Habib doesn't expect good news.
The July employment report, delivered a month ago, estimated that the economy shed a net 51,000 jobs. Habib expects that number to be revised to reflect an even bigger loss of jobs. Such an outcome "could push interest rates to a more improved level."
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This week: Sept. 4 - Sept. 10 
