Mortgage Rates Level Off This Week

Capping a steady climb since mid-January, interest rates on 30-year fixed-rate mortgages (FRMs) shed 0.14 percentage points this week to an average of 5.33%, according to the BankingMyWay.com Rate Index. The leveling out of rates likely comes as a relief to consumers delaying their mortgage applications in hopes of seeing a return to January's historically low rates of less than 5.0%.

The change in direction was largely due to a continued decline in the economy, according to Frank Nothaft, vice president and chief economist for Freddie Mac (FRE).

"Mortgage rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation," Nothaft said in a press release. Nothaft went on to cite record low consumer sentiment and the Federal Reserve's lowered 2009 economic growth forecasts as additional indicators that the economy is likely to get worse before it gets better.

For those hoping for a second chance at sub-5% interest rates on 30-year FRMs, the news comes as a silver-lining to an otherwise dark week that saw the Dow fall to its lowest level since 1997. Refinancing activity has been see-sawing over the last few weeks as homeowners try to get a handle on where rates are going.

But despite all indications that the economy will continue to struggle in 2009, there's no guarantee that mortgage rates will remain at these historic lows. Concerns over growing government debt have pushed up mortgage rates in the past, and could do so again once money from the recently approved $787 billion federal stimulus package starts hitting the streets. President Obama's mortgage and foreclosure plan may also impact rates.