U.S. Mortgage Rates Drift Lower as Treasury Securities Snapped Up

by Amy Lillard

Mortgage rates dropped in the week ending August 2, 2007, according to finance company Freddie Mac. Their weekly Primary Mortgage Market Survey® was released Thursday.

"Market investors seeking safety from the subprime fallout bought Treasury securities, pushing bond yields down and allowing mortgage rates to drift a bit lower," said Frank Nothaft, Freddie Mac vice president and chief economist.

This week's survey indicates 30-year fixed mortgage rates averaged 6.68 percent, a slight decrease from last week's average of 6.69 percent. Last year at this time, the 30-year fixed-rate mortgage averaged 6.63 percent.

Fixed mortgage rates for 15-year terms averaged 6.32 percent, a drop from last week's average of 6.37. A year ago, the 15-year fixed-rate mortgage averaged 6.27 percent.

Averages for adjustable-rate mortgages (ARMs) also posted downward changes this week. Five-year ARMs averaged 6.29 percent this week, down slightly from last week's average of 6.30 percent. At this time last year, the five-year ARM also averaged 6.27 percent.

One-year ARMs averaged 5.59 percent this week, a plunge from last week's average of 5.69 percent. Last year, the one-year ARM averaged 5.69 percent.
Freddie Mac said that to obtain these rates lenders charged an average 0.3-point fee for fixed-rate mortgages. Lenders charged a 0.5-point fee for adjustable-rate mortgages.

"Sales of new and existing homes fell in June, and prices continue to weaken, especially in the markets that had recorded the strongest gains over the past few years," said Nothaft. "There are early signs, however, that the market is stabilizing. As construction spending levels off, the drag on GDP growth will continue to diminish. Meanwhile, the 5 percent rise in pending home sales in June suggests that sales in July and August may reverse last month's decline."

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.