Mortgage Rates Decline to 5-Month Low

Last week’s better-than-expected reading on the Consumer Price Index helped to push mortgage rates down to a five-month low, according to Bankrate.com’s weekly mortgage survey of large lenders.

The average 30-year, fixed-rate mortgage fell to 6.48 percent, the lowest since March 29, while the average 15-year, fixed-rate mortgage, popular for refinancing, dropped by a similar amount to 6.19 percent.

On larger loans, the average jumbo 30- year, fixed-rate declined to 6.74 percent. Adjustable-rate mortgages also backtracked. The average 5/1 ARM slid to 6.24 percent, and the average one-year ARM retreated to 6 percent.

Slower economic growth has helped bring fixed mortgage rates to a five-month low, along with the Federal Reserve Board hitting the pause button on rate increases. Although inflation remains a threat, bond investors are confident in the Fed's forecast that inflation will recede as the economy cools, Bankrate.com says in its report.

Fixed mortgage rates have fallen nearly one-half of a percentage point since the Fed last hiked rates at the end of June. At the time, the average 30-year fixed mortgage rate was 6.93 percent, meaning that the monthly payment on a loan of $165,000 was $1,090.

With the average 30-year fixed rate now 6.48 percent, the same loan originated today would carry a monthly payment of $1,040.74. With the recent pullback, fixed mortgage rates remain an attractive refinancing alternative for adjustable-rate borrowers facing sharp payment adjustments.

Source: Bankrate.com (08/24/06)