Bankrate: Mortgage Rates Tumble to 7-Month Low

Average 30-year fixed mortgage rate is now 6.29 percent
Average 30-year fixed mortgage rate is now 6.29 percent

RISMEDIA, September 29, 2006?Mortgage rates fell sharply on the heels of soft economic data, one week after the Federal Open Market Committee left interest rates unchanged. The average 30-year fixed mortgage rate is now 6.29 percent, the lowest since March 1. According to Bankrate.com’s weekly national survey of large lenders, the 30-year fixed rate mortgages had an average of 0.31 discount and origination points.

The average 15-year fixed rate mortgage, popular for refinancing, fell below the 6 percent mark for the first time since the beginning of March, to 5.96 percent. On larger loans, the average jumbo 30-year fixed rate sank to 6.57 percent. Adjustable rate mortgages were also in on the act. The average 5/1 adjustable rate mortgage dropped to 6.07 percent and the average one-year ARM retreated to 5.9 percent.

Fixed mortgage rates have been falling consistently for the past three months, but posted the biggest decline yet this week after disappointing economic data. A regional economic barometer released by the Federal Reserve Bank of Philadelphia ignited a bond market rally over concerns that the economy was on the verge of a rapid slowdown. This also fueled speculation that the Fed’s next move may be to cut rates. The result was a sharp drop government bond yields, particularly the ten-year Treasury note. Fixed mortgage rates are closely related to yields on long-term government bonds.

Fixed mortgage rates have dropped notably since the Fed last hiked rates at the end of June. At the time, the average 30-year fixed mortgage rate was 6.93 percent, meaning that the monthly payment on a loan of $165,000 was $1,090. With the average 30-year fixed rate now 6.29 percent, the same loan originated today would carry a monthly payment of $1,020.23. Fixed mortgage rates are a compelling refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.

SURVEY RESULTS

30-year fixed: 6.29% — down from 6.44% last week (avg. points: 0.31)

15-year fixed: 5.96% — down from 6.12% last week (avg. points: 0.3)

5/1 ARM: 6.07% — down from 6.19% last week (avg. points: 0.28)

Bankrate’s national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week’s move in mortgage rates, go to: http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate’s weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. Very few panelists see rates rebounding in the coming weeks. Just 20 percent forecast that rates will rise, while 30 percent expect rates to fall further. Half of respondents predict that rates will remain unchanged in the next 30 to 45 days.

For the full mortgage Rate Trend Index, go to: http://www.bankrate.com/RTI.

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