U.S. Mortgage Rates Drop from Weakened Housing Market

by Amy Lillard

Mortgage rates dropped in the week ending July 26, 2007, according to finance company Freddie Mac. Their weekly Primary Mortgage Market Survey® was released Thursday.

"Mortgage rates eased this week on market concerns that a further weakening of housing demand this spring will delay any recovery in the sector," said Frank Nothaft, Freddie Mac vice president and chief economist. "For example, building permits fell last month to the slowest pace in a decade, and more recent data on June sales of existing homes showed a fourth consecutive monthly decline."

This week's survey indicates 30-year fixed mortgage rates averaged 6.69 percent, a drop from last week's average of 6.73 percent. Last year at this time, the 30-year fixed-rate mortgage averaged 6.72 percent.

Fixed mortgage rates for 15-year terms averaged 6.37 percent, a slight decrease from last week's average of 6.38. A year ago, the 15 year fixed rate mortgage averaged 6.34 percent.

Averages for some adjustable-rate mortgages (ARMs) also posted minimal changes this week. Five-year ARMs averaged 6.30 percent this week, a drop from last week's average of 6.35 percent. At this time last year, the five-year ARM also averaged 6.35 percent.

One-year ARMs averaged 5.69 percent this week, down slightly from last week's average of 5.72 percent. Last year, the one-year ARM averaged 5.78 percent.
Freddie Mac said that to obtain these rates lenders charged an average 0.4-point fee for all mortgages except the one-year ARM, with a 0.5-point fee.

"Several factors contributed to the softening in housing markets this spring," said Nothaft. "In addition to the tightening of lending standards earlier this year, especially on subprime loans, the 40 basis point jump in rates on 30-year fixed-rate mortgages in June may have deterred potential buyers. For the year-to-date, sales of single-family homes were down about 9 percent from the first half of 2007."

Freddie Mac is a mortgage finance company established by Congress in 1970. The company buys mortgages and mortgage-related securities and packages them to sell to investors or to hold in its own portfolio. They release their summary of average mortgage rates weekly.