Slow Economic Growth Pushes US Mortgage Rates Lower

Freddie Mac yesterday released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 6.31 percent with an average 0.4 point for the week ending November 2, 2006, down from last week when it averaged 6.40 percent.  Last year at this time, the 30-year FRM averaged 6.31 percent. 

The 15-year FRM this week averaged 6.02 percent with an average 0.4 point, down from last week when it averaged 6.10 percent.  A year ago, the 15-year FRM averaged 5.85 percent. 

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.05 percent this week, with an average 0.5 point, down from last week when it averaged 6.14 percent.  A year ago, the five-year ARM averaged 5.76 percent. 

One-year Treasury-indexed ARMs averaged 5.53 percent this week with an average 0.6 point, down from last week when it averaged 5.60 percent.  At this time last year, the one-year ARM averaged 5.09 percent. 

(Average commitment rates should be reported along with average fees and points to reflect the total cost of obtaining the mortgage.)

“Lower than expected third quarter Gross Domestic Product (GDP) figures helped to put a damper on rising rates this week,” said Frank Nothaft, Freddie Mac vice president and chief economist.  “With mortgage rates down this week, we may see a spurt of refinancing by those who want to get out of ARMs that are scheduled to reset in the next year while interest rates are still comparatively low.

“We are also seeing a higher number of homeowners who are taking cash out of their homes for home improvement or other needs rather than opting for a prime rate home equity loan now that the prime rate is over 8 percent.”

SUMMARY OF SURVEY RESULTS
Fixed-Rate Mortgages
	Average Conventional 30-Year Commitment Rate	Fees & Points	Average Conventional 15-Year Commitment Rate	Fees & Points
US	6.31	0.4	6.02	0.4
Northeast	6.31	0.4	6.03	0.4
Southeast	6.29	0.5	6.01	0.6
North Central	6.33	0.3	6.02	0.4
Southwest	6.30	0.4	6.02	0.4
West	6.32	0.4	6.01	0.5

 

Adjustable–Rate Mortgages
	5/1 ARM Commitment Rate	Fees & Points	Margin	1 Year ARM Commitment Rate	Fees & Points	Margin
US	6.05	0.5	2.76	5.53	0.6	2.75
Northeast	6.04	0.4	2.78	5.50	0.6	2.75
Southeast	6.03	0.5	2.76	5.55	0.5	2.77
North Central	6.07	0.3	2.77	5.59	0.2	2.75
Southwest	6.05	0.5	2.76	5.43	0.7	2.76
West	6.05	0.6	2.74	5.53	0.8	2.74

Freddie Mac defines its regions as follows:
Northeast:  NY, NJ, PA, DE, MD, DC, VA, WV, PR, ME, NH, VT, MA, RI, CT, VI
Southeast:  NC, SC, TN, KY, GA, AL, FL, MS
North Central:  OH, IN, IL, MI, WI, MN, IA, ND, SD
Southwest:  TX, LA, NM, OK, AR, MO, KS, CO, NE, WY
West:  CA, AZ, NV, OR, WA, UT, ID, MT, HI, AK, GU

DEFINITIONS
Commitment Rate is the interest rate a lender would charge to lend mortgage money to a qualified borrower exclusive of the fees and points required by the lender.  This commitment rate applies only to conventional financing on conforming mortgages with loan-to-value rates of 80 percent or less.
ARM Index –is the One-year Treasury
Loan to Value Ratio (LTV) is the ratio of the loan amount of a mortgage loan to the lower of the appraisal value or purchase price of the property securing the loan.
Origination Fees and Discount Points are the total charged by the lender at settlement. One point equals one percent of the loan amount.
Margin is a fixed amount added to the underlying index to establish the fully indexed rate for an ARM.
Weighted Averages for the Primary Mortgage Market Survey have been adjusted as of October 26, 2006.  The new weights use the dollar volume of conventional mortgage originations within the 1-unit Freddie Mac loan limit as reported under the Home Mortgage Disclosure Act (HMDA) for 2005.  The weights are listed in the table below.

Freddie Mac Region	PMMS Weights
Northeast	24.5
Southeast	18.6
North Central	15.4
Southwest	10.4
West	31.0