30-Year Mortgage Rates Head Downward

[Sep 27, 2007.]

Homeowners received some encouraging news this week, thanks to an item from the mortgage company known as Freddie Mac.

Freddie Mac reports that 30-year mortgage rates have declined to their lowest level in some three months.

The fixed-rate mortgage rate now averages 6.45%. That's a decline from the 6.52% rate the previous week. It's also the lowest rate since the end of May, when rates bottomed out at 6.42%.

The news is certainly encouraging for homebuyers, who are often finding it difficult to secure loans. That's because financial institutions are invoking stricter borrowing standards because of the increasing default rate.

Meanwhile, the rates on other mortgages appear to vary.

For instance, the rates for 15-year, fixed-rate mortgages are averaging 6.12%. That's a decrease from the previous week's rate of 6.18%. Rates on 5-year adjustable-rate mortgages increased to 6.35%, up from 6.34% the week before. One-year adjustable-rate mortgages experienced a hefty jump in rates, rising to 5.84% from 5.60% the week before.

The decrease in the rates for 30-year mortgages is being attributed to the Federal Reserve's decision to cut its discount rate. That rate refers to the interest charged to make loans to banks. Observers predict the Fed will also reduce its federal funds rate fund. The fund plays a significant role in both consumer and business loans.  At this time last year, the 30-year mortgage rate was 6.44%, while the 15-year mortgage rate was 6.14%. The five-year adjustable rate mortgage was 6.11%; the one-year adjustable rate mortgage was 5.59%.

Housing sales plummeted last year, following a five-year period of growth. The housing market is also feeling the effects of the collapse of the subprime loan industry. Subprime loans are those loans which are given to homebuyers who have troubled histories and who do not qualify for other types of loans.

Julie Ann Amos
September 27th 2007

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