Signs of Low Inflation Keep US Long Term Mortgage Rates Steady

The 15-year FRM this week averaged 5.87 percent with an average 0.5 point, unchanged from last week when it averaged 5.87 percent.  A year ago, the 15-year FRM averaged 6.17 percent. 

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.89 percent this week, with an average 0.6 point, up slightly from last week when it averaged 5.87 percent.  A year ago, the 5-year ARM averaged 6.22 percent. 

One-year Treasury-indexed ARMs averaged 5.48 percent this week with an average 0.7 point, up from last week when it averaged 5.42 percent.  At this time last year, the 1-year ARM averaged 5.62 percent. 

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

“Low employment growth in April – the slowest pace since November 2004 – and downward revisions to both February and March job growth tempered market concerns of future increases in the rate of inflation,” said Frank Nothaft, Freddie Mac vice president and chief economist.  “As a result, mortgage rates were little changed this week.

“Despite a slowdown in house price growth, borrowers continue to refinance their loans, extracting approximately $70.5 billion in cash from their home equity in the first quarter of 2007, down slightly from $77.0 billion in the fourth quarter of 2006.  According to the Federal Reserve Board, homeowners had nearly $11 trillion in home equity at the end of 2006, an increase of 30 percent over the past three years.”

Freddie Mac defines its regions as follows:
Northeast:  NY, NJ, PA, DE, MD, DC, VA, WV, ME, NH, VT, MA, RI, CT
Southeast:  NC, SC, TN, KY, GA, AL, FL, MS, PR, VI
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.