Mortgage Rates Stay Calm in Week

Mortgage rates have settled into a relative calm, as the Fed once again held its target rate steady and investors took a wait-and-see approach to a largely negative outlook from the nation's largest mortgage buyer, Freddie Mac(FRE Quote).

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. ...