Mortgage Rates Continue to Fall

Marking the fourth consecutive week of declines, mortgage rates inched down once again this week, both ""Freddie Mac"":http://www.freddiemac.com/index.html and ""Bankrate"":http://www.bankrate.com/ reported Thursday.

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According to Freddie Mac's Primary Mortgage Market Survey, rates for 30-year fixed mortgages averaged 4.98 percent with an average 0.6 point for the week ending January 28, 2010, down 0.01 percent from last week. Compared to the same week last year, rates are down 0.12 percent. In addition, 15-year fixed-rate mortgages averaged 4.39 percent with an average 0.6 point, falling 0.01 percent from last week and 0.41 percent year-over-year.

Adjustable-rate mortgages also saw slight declines, Freddie Mac's report said. The 5-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 4.25 percent this week with an average 0.6 point, a .02 percent decrease from last week and 1.02 percent lower than a year ago. At 4.29 percent with an average 0.5 point, the 1-year Treasury-indexed ARM fell 0.03 percent from last week and 0.61 percent from the same week last year.

""Mortgage rates held steady this week ahead of the Federal Reserve's policy committee meetings,"" said Frank Nothaft, Freddie Mac VP and chief economist. ""The Fed announced on January 27 that economic activity has continued to strengthen. It also noted that with substantial resource slack continuing to restrain cost pressures and with longer-term inflation expectations stable, inflation is likely to be subdued for some time.""

As the number of new one-family housing starts hit a historical low of just under one-half million units, Nothaft said last year was rough on the housing market. He also noted that new home sales last year were under 400,000 homes, an all-time record since data compilation began in 1963. However, Nothaft said there were almost 5 million existing-home sales, which was the first annual increase in four years.

Results from Bankrate's weekly national survey of mortgage rates showed similar results. The average rate for 30-year fixed mortgages dropped to 5.13 percent with an average 0.49 point this week, a 0.02 percent decline from last week. Rates for 15-year fixed mortgages fell to 4.54 percent with an average 0.43 point, showing a decrease of 0.02 percent from last week.

Bankrate also reported a slight reduction in adjustable-rate mortgages. The average 5-year ARM this week was 4.54 percent with an average 0.38 point, a 0.09 percent dip from last week. In addition, the average 3-year ARM fell to 4.65 percent. Jumbo 30-year fixed-rate mortgages showed the only increase, jumping to 5.99 percent this week.

Complementing Bankrate's weekly survey is its weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way mortgage rates are headed over the next week. Half of the panelists predict an increase in mortgage rates in the coming week, 29 percent expect rates to remain unchanged, and only 21 percent forecast another decline.

With rates having fallen each week of the new year, 2010 has been kind to mortgage shoppers thus far, Bankrate said. The company believes recent market jitters, traceable to uncertainty over Bernanke's reconfirmation as Federal Reserve Chairman and President Obama's proposal on the separation of trading from banking activity, helped keep mortgage rates moving lower.

However, as mortgage rates are closely related to yields on long-term government and mortgage-backed bonds, rates will eventually be pushed higher because the Fed seems intent on wrapping up mortgage bond purchases at the end of the first quarter, Bankrate explained.