Mortgage Rates Slip as Investors Wonder About Stimulus

After a month of weekly increases, mortgage rates followed Treasury bond yields down this week.

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""Freddie Mac"":http://www.freddiemac.com/pmms/ reported that the 30-year fixed averaged 3.59 percent (0.6 point) for the week ending August 30, down from 3.66 percent in the previous week's survey.

The 15-year fixed also fell, dropping to 2.86 percent (0.6 point) from 2.89 percent.
In addition, both the 5-year and 1-year adjustable rate mortgage averages fell, declining to 2.78 percent (0.6 point) and 2.63 percent (0.4 point), respectively.

Frank Nothaft, VP and chief economist for the GSE, said the declines follow economic news that may indicate another stimulus is on the way.

""Treasury bond yields fell, allowing mortgage rates to follow, after the release of the July 31 and August 1 minutes of the Federal Reserve's monetary policy committee,"" Nothaft said. ""Committee members agreed that economic activity had decelerated more in recent months than they had anticipated at their last meeting in June. Some members even saw room for additional stimulus fairly soon if need.""

Despite the overall waning of the economy, Nothaft was quick to note that the housing market has gained more ground.

""Nonetheless, the housing market continued to show improvement over the past few months,"" he said. ""New home sales rose 3.6 percent in July, matching May's pace as the strongest month since April 2010. Similarly, pending home sales also rose in July to its highest rate since April 2010.""

""Bankrate's"":http://www.bankrate.com/ survey showed that the 30-year fixed average took a substantial tumble, falling to 3.80 percent from 3.91 percent before. The 15-year fixed also saw a fairly large drop, averaging 3.03 percent (from 3.12 percent the previous survey).

Meanwhile, the 5/1-year adjustable rate mortgage averaged 2.80 percent, down from 2.90 percent a week ago.

""Company analysts and financial experts"":http://www.bankrate.com/news/rate-trends/mortgage.aspx surveyed by Bankrate mostly believe mortgage rates will either remain stable or trend down in the near future.

""The minutes of the Federal Reserve's most recent meeting gave investors hope that additional Fed stimulus might be close at hand. All eyes now turn to Jackson Hole, Wyoming for Fed chairman Ben Bernanke's speech on August 31. If he even hints at forthcoming stimulus, both Treasury yields and mortgage rates will tumble further. Mortgage rates are closely related to yields on long-term government bonds,"" Bankrate said in a release.

However, not all analysts agree. Senior mortgage reporter Polyana de Costa said she sees evidence of an upward trend to come.

""The latest economic reports have been somewhat positive, which might put some upward pressure on rates next week. If [Fed chairman Ben Bernanke] disappoints investors Friday - and I think he will - rates will probably increase slightly,"" de Costa said.