Mortgage Rates…The Descent Continues

Mortgage interest rates are already at their lowest level in decades, and this week, they headed even lower. The descent was prompted largely by fears that another housing downturn could hamper the economic recovery, after July's home sales took a deeper plunge than expected.

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Long-term mortgage rates have dropped to new record lows for nine weeks out of the last 10, according to ""Freddie Mac"":http://www.freddiemac.com/pmms/release.html?week=34&year=2010&display=release. This week, the GSE reports that the average rate for a 30-year fixed-rate mortgage (FRM) came in at 4.36 percent (0.7 point), down from 4.42 percent last week.

Rates for 15-year FRMs are now averaging 3.86 percent (0.6 point) in Freddie's study. That's down from last week's average of 3.90 percent.

Adjustable-rate mortgages (ARMs), too, are treading extremely low. Freddie Mac says the 5-year ARM remained tied at its low for the survey at 3.56 percent (0.6 point). One-year ARMs dropped from 3.53 percent last week to 3.52 percent (0.7 point).

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Amy Crews Cutts, deputy chief economist at Freddie Mac, explained, ""Existing home sales plunged 27 percent in July, while new homes fell 12 percent to a new all-time record low, which led to some market concerns that the housing market may slow the economic recovery. As a result, long-term bond yields fell to the lowest levels since January 2009, allowing fixed mortgage rates to ease to new record lows this week.""

A separate study by ""Bankrate"":http://www.bankrate.com/finance/mortgages/mortgage-rate-trend-index8-152214-1.aspx, which is based on data provided by the top 10 banks and thrifts in the top 10 U.S. markets, also found that mortgage rates across the board sank lower this week.

The tracking company reports that the average conforming 30-year fixed mortgage rate is now at 4.59 percent (0.38 point), down from 4.63 percent last week. The average 15-year fixed mortgage retreated to 4.08 percent (0.40 point) from 4.11 percent the week prior.

Bankrate says the larger jumbo 30-year fixed rate slipped to a new record low of 5.22 percent, while rates on 5-year ARMs inched down to 3.85 percent (avg. points: 0.31).

Bankrate said in its report that concerns over economic growth and deflation are the two catalysts behind the notable declines in mortgage rates since spring.

“From a refinancing or home purchase standpoint, fixed mortgage rates offer very affordable payments,” the company said, however, “Would-be borrowers are still reluctant given the weak job market, lack of home equity, and higher down payment requirements.”