Bankrate: Mortgage Rates Fall on Fed Pause

NEW YORK, Aug. 10 /PRNewswire-FirstCall/ -- Mortgage rates declined for the third week in a row and fifth time in the last six weeks, as the Federal Reserve held interest rates steady for the first meeting since May 2004. The average 30-year fixed rate mortgage fell to 6.57 percent, the lowest since April 19. According to Bankrate.com's weekly national survey of large lenders, the 30-year fixed rate mortgages had an average of 0.32 discount and origination points.

The average 15-year fixed rate mortgage, popular for refinancing, dropped by a similar amount to 6.25 percent. On larger loans, the average jumbo 30- year fixed rate declined to 6.79 percent. Adjustable rate mortgages also backtracked. The average 5/1 adjustable rate mortgage slid to 6.32 percent, and the average one-year ARM retreated to 6.01 percent.

News of slower economic growth, such as a disappointing number of new jobs added in July, reinforced the Fed's assertion that a cooling economy and the 17 interest rate hikes already implemented would be enough to tame inflation. As a result, the Fed's record streak of 17 consecutive interest rate hikes is over, buying the Fed some time to see if that scenario plays out. With the Fed casting aside inflation concerns and focusing on a slowing economy, the Fed followed the lead of the bond market. Yields on long-term government bonds, to which fixed mortgage rates are closely related, had been declining in anticipation of the Fed's pause. But with inflation still very much an issue, this trend may not hold much longer.

Fixed mortgage rates have fallen more than one-third of a percentage point since the Fed last hiked rates at the end of June. At the time, the average 30-year fixed mortgage rate was 6.93 percent, meaning that the monthly payment on a loan of $165,000 was $1,090. With the average 30-year fixed rate now 6.57 percent, the same loan originated today would carry a monthly payment of $1,050.52. With the recent pullback, fixed mortgage rates remain an attractive refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.

SURVEY RESULTS

30-year fixed: 6.57% -- down from 6.65% last week (avg. points: 0.32)
15-year fixed: 6.25% -- down from 6.3% last week (avg. points: 0.31)
5/1 ARM: 6.32% -- down from 6.36% last week (avg. points: 0.28)

Bankrate's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.

For a full analysis of this week's move in mortgage rates, go to: http://www.bankrate.com/mortgagerates

The survey is complemented by Bankrate's weekly forward-looking Rate Trend Index, in which a panel of mortgage experts predicts which way the rates are headed over the next 30 to 45 days. The panelists say rates have hit bottom. The overwhelming majority of respondents - 71 percent - expect rates to rise, with the remaining 29 percent saying rates will remain unchanged. Interestingly, no one predicts rates will fall further in the next 30 to 45 days.

For the full mortgage Rate Trend Index, go to: http://www.bankrate.com/RTI

About Bankrate, Inc.

Bankrate, Inc. (NASDAQ:RATE) owns and operates Bankrate.com, a leading Internet consumer banking marketplace. Bankrate.com is a destination site of personal finance channels, including banking, investing, taxes, debt management and college finance. It is the leading aggregator of more than 300 financial products, including mortgages, credit cards, new and used auto loans, money market accounts and CDs, checking and ATM fees, home equity loans and online banking fees. Bankrate.com reviews more than 4,800 financial institutions in 575 markets in 50 states. In 2005, Bankrate.com had over 46 million unique visitors. Bankrate.com provides financial applications and information to a network of more than 75 partners, including Yahoo! (NASDAQ: YHOO) , America Online (NYSE:TWX) , The Wall Street Journal (NYSE:DJ) and The New York Times (NYSE:NYT) . Bankrate.com's information is also distributed through more than 400 national and state publications. In addition to Bankrate.com, Bankrate, Inc. also owns and operates FastFind, an internet lead aggregator and MMIS/Interest.com, which publishes mortgage guides and financial rates and information.