Market concerns over the Federal Reserve's bond purchase program is cited as a possible factor in a dip in mortgage rates this week.
Freddie Mac reports the average for the 30-year fixed-rate mortgage (FRM) was down 14 basis points from the week before -- to 4.37% percent with an average 0.7 point. Last year at this time, it averaged 3.53%.
The 15-year FRM averaged 3.41% with an average 0.7 point, down from last week's 3.53%. A year ago, the 15-year FRM averaged 2.83%.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.17% this week with an average 0.6 point. Last week it averaged 3.26%. at this time last year, it averaged 2.69%.
The average this week for the 1-year Treasury-indexed ARM was 2.66% this week with an average 0.4 point -- the same as last week. At this time last year, the 1-year ARM averaged 2.69%.
"Fixed mortgage rates fell as Federal Reserve Chairman Bernanke helped ease market concerns about the Fed reducing its bond purchases,” according to Frank Nothaft, vice president and chief economist, Freddie Mac. During a question and answer session following a speech on July 10th, Bernanke indicated that a highly accommodative monetary policy is what's needed in the U.S. economy.
"Indications of a slowing in the economic recovery also placed downward pressure on mortgage rates,” Nothaft added. “Consumer sentiment fell to a three month low in July while retail sales in June grew by only 0.4 percent, which was half of the market consensus forecast. In addition, housing starts fell in June to the slowest pace since August 2012."
Bankrate.com says disappointing reports on retail sales and housing starts resulted in mortgage rates pulling back from last week's 2-year high.
As tracked by Bankrate, the benchmark 30-year FRM, which has an average of 0.31 discount and origination points, slid to 4.56%.
The average 15-year FRM fell to 3.65%, while the larger jumbo 30-year FRM declined to 4.71%. Adjustable rate mortgages were mostly lower, with the popular 5-year ARM retreating to 3.56% and the 7-year rate falling to 3.87%. The 10-year ARM was the exception -- moving a touch higher to 4.08%.
Weaker economic data increases the odds the Fed holds off tapering its bond-buying stimulus. And further easing the upward pressure on interest rates this week were comments from Fed Chairman Ben Bernanke, who emphasized in an appearance before Congress that the tapering is not set in stone and the Fed is very adaptable to incoming economic data.
As recently as May 1, the average 30-year FREM was 3.52%. At that time, a $200,000 loan would have carried a monthly payment of $900.32. With the average rate currently at 4.56%, the monthly payment for the same size loan would be $1,020.51, a difference of $120 per month for anyone who waited just a little too long.