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Mortgage Rates Stay Calm in Week

Lauren Tara LaCapra

Freddie's weekly rate survey, released Thursday, showed that long-term fixed rates were flat and other rates posted little movement. However, weak consumer demand combined with a lack appetite from investors for bundled-loan securities promises more trouble ahead.

Mortgage applications have fallen to the slowest pace in half a decade and the inventory of unsold homes remains at historically high levels. While Freddie is not the only mortgage buyer in the marketplace, its lack of capital provides uncertainty about how much -- or whether -- it will be able to increase its portfolio going forward. Freddie counterpart Fannie Mae(FNM Quote) has already slowed its rate of growth to 10.6% through June from 14.3% last year.

"The housing market is continuing to act as a drag on the economy," says Frank Nothaft, Freddie's chief economist. He noted that fixed investment in residential properties knocked six-tenths of a percentage point off second-quarter growth in real GDP.

For the week ended Thursday, the average Freddie customer acquired a 30-year fixed mortgage at a rate of 6.52%, with an upfront payment of seven-tenths of a point. The rate was unchanged from a week earlier. Shorter-term, 15-year fixed mortgages averaged 6.1% with an upfront payment of seven-tenths of a point, slightly higher than the 6.07% week-ago level.

Five-year adjustable-rate mortgages that are indexed to Treasury notes averaged 6.05% with an upfront payment of six-tenths of a point, slightly lower than the week-ago rate of 6.07%. One-year ARMs averaged 5.22% with a payment of six-tenths of a point as well, down from 5.27% a week earlier.

All rates are still far below year-ago levels.

Fannie, the second-biggest mortgage buyer behind Freddie, is set to report quarterly results on Friday, which might provide some additional color on the current state of the mortgage market and the outlook going forward.

Keith Gumbinger, vice president of HSH Associates, a firm that also tracks mortgage rates, notes that the housing bill's passage last week eased pressure on the housing market. However, Gumbinger notes that the widespread "buyer's strike" going on in terms of mortgage securities can only be exacerbated by Freddie and Fannie decelerating their loan purchases.

"It could pressure rates higher ultimately," he says. But for now, "things are pretty flat -- we're all due for kind of a breather."

Consumers can check the best local mortgage rates by visiting BankingMyWay.com.