Consumers Get a Bit of Mortgage-Rate Relief - TheStreet

Consumers Get a Bit of Mortgage-Rate Relief

Rates have leveled off in recent days, which may help people with their applications.
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Mortgage rates have moved little of late, though they have been rising fairly steadily on 30-yr and 15-yr fixed rate mortgages since mid-March. A potential leveling out could give some needed breathing room to consumers looking to buy a home.

The rates for 30-year fixed rate mortgages averaged 6.37% with 0.6 point, marginally higher than last week's average of 6.35% with 0.6 point, according to Freddie Mac's Primary Mortgage Market Survey.

Frank Nothaft, Freddie Mac's vice president and chief economist, pointed to mixed economic reports in the housing sectors as one reason for the stable rates. Nothaft cited reports that sales for existing homes fell more than expected in May. But he added that this news was offset by an increase in mortgage applications for the week ending July 4 that "was nearly 10% above the over five-year low set just two weeks prior, despite the holiday break."

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Fixed rate loans consistently account for a large majority of mortgage applications, according to the Mortgage Bankers Association. (Adjustable rate mortgages accounted for only 10% of the overall application volume in the week ending July 4.) Thus, the rise in FRM rates since mid-March has translated into a serious hit to the wallets of consumers looking to buy a home.

Back on March 20 of this year, rates were down at 5.87% with 0.5 point for 30-year FRMs and 5.27% with 0.5 points for 15-year FRMs. The current rates represent increases of 0.5 and 0.64 percentage points, respectively. On a $200,000 30-year FRM mortgage, a 0.5 percentage point difference in interest rate translates into an extra $775.80 per year in payments. That adds up to over $23,274 in extra interest accrued over the life of the loan, assuming you don't make any prepayments.

For homeowners looking to refinance with a $150,000 15-year FRM, a 0.64 percentage point difference equates to a $613.32 increase in yearly payments and an extra $9,199.80 in interest paid over the 15-year life of the loan.

But as rates have been rising, home values have been falling. National home values declined an average of 10.4% over the first quarter this year, according to Freddie Mac's Conventional Mortgage Home Price Index (CMHPI).

Nothaft commented in May that he expects "to see further declines in average home values throughout this year and into 2009."

While that's not good news to homeowners who are looking to sell or to refinance their homes, it could be good news for consumers on the hunt for homes -- especially if mortgage rates' recent increases are coming to an end.

If you are looking to buy a home and are shopping around for the mortgage rates, you can check out the latest rates available in your area by visiting the mortgage section of

BankingMyWay.com

. Enter your zip code to find offers from your local lending institutions.

Peter McDougall is a freelance writer who lives in Freeport, Maine, with his wife and their dog.