Ann Arbor Real Estate-Bankrate: Mortgage Rates Decline for the Second Consecutive Week

Average 15-year fixed rate mortgage popular for refinancing slid to 6.47 percent

RISMEDIA, July 14, 2006—Fixed mortgage rates continued to drop this week. The average 30-year fixed rate mortgage dipped to 6.87 percent from 6.91 percent. According to Bankrate.com's weekly national survey of large lenders, the 30-year fixed rate mortgages had an average of 0.31 discount and origination points.

The average 15-year fixed rate mortgage popular for refinancing slid to 6.47 percent. On larger loans, the average jumbo 30-year fixed rate decreased slightly, but remains above the 7 percent threshold, at 7.03 percent. Adjustable rate mortgages were mixed. The average 5/1 adjustable rate mortgage fell to 6.52 percent, and the average one-year ARM increased to 6.12 percent.

Two things happened to bring mortgage rates down this week. One was the reaction to Tuesday's train bombings in Mumbai. At times of international tension, investors buy U.S. Treasury notes, and such a buying spree depresses bond yields. Mortgage rates often follow. By Tuesday afternoon, bond yields had risen almost, but not quite, to their levels before the train bombings.

The bigger factor in this week's rate drop comes from Wall Street's reaction to the June employment report, released Friday by the Labor Department. Most investors expected the report to say that the economy had grown by 160,000 to 175,000 jobs in June. As it turned out, the report said non-farm payrolls grew by 121,000. The lower-than-expected estimate caused investors to reason that with a slower job market, corporate payroll stays down, inflation is more likely to be restrained, and may influence the Federal Reserve to stop raising short-term interest rates. This could take away some of the upward pressure on long-term rates, including for mortgages.

Fixed mortgage rates are considerably higher than one year ago, the average 30-year fixed mortgage rate was 6.11 percent, meaning that the monthly payment on a loan of $165,000 was $1,000.96. With the average 30-year fixed rate now 6.87 percent, the same loan originated today would carry a payment of $1,083.38. Despite recent increases, fixed mortgage rates remain an attractive refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.

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