Mortgage Rates Decline Due to the Prospect of Economic Weakness

NEW YORK – Fixed mortgage rates declined this week after six consecutive weeks of rising interest rates. The average 30-year fixed rate mortgage decreased from 5.96 percent to 5.88 percent, according to Bankrate.com’s weekly national survey of large lenders. The 30-year fixed rate mortgages in this week’s survey had an average of 0.37 discount and origination points.

The average 15-year fixed mortgage rate declined slightly from 5.56 percent to 5.50 percent, while the average jumbo 30-year fixed rate mortgage slipped from 6.14 percent to 6.07 percent. The average 5/1 adjustable rate mortgage decreased from 5.62 percent to 5.56 percent, and the one-year ARM rose to 4.94 percent from 4.89 percent one week ago.

Mortgage rates fell because a pair of economic reports led investors to believe that the economy is slowing due to high fuel prices. The report on retail sales in July showed weaker-than-expected growth. One strong venue of retail sales was at gas stations; as the Consumer Price Index showed, people spent more at gas stations in July because fuel prices went up 3.8 percent. While higher fuel prices might increase overall inflation, they also can stall the economy. Among investors the latter concern outweighed the former; the prospect of economic weakness sent rates lower.

Mortgage rates have climbed in recent weeks, and so have the monthly payments confronted by home buyers. Two months ago, the average 30-year fixed rate mortgage was 5.61 percent. At the time, the monthly payment on a $165,000 loan was $948.27. With the average rate now 5.88 percent, the monthly payment on the same $165,000 loan is $976.56.