U.S. Mortgage Rates Drop After Lower Treasury Yields, Fed Rate Cut

by Amy Lillard

Mortgage rates dropped across the board in the week ending August 23, 2007, according to finance company Freddie Mac. Their weekly Primary Mortgage Market Survey® was released Thursday.

"Interest rates on conforming long-term fixed-rate mortgages and one-year adjustable rate mortgages trended down by about one-tenth of a percent in the past week," said Frank Nothaft, Freddie Mac vice president and chief economist. "This is as a result of yields on Treasury securities coming down, and the Fed's decision to cut the discount rate by half a percent to 5.75 percent last Friday."

This week's survey indicates 30-year fixed mortgage rates averaged 6.52 percent, a drop from last week's average of 6.62 percent. Last year at this time, the 30-year fixed-rate mortgage averaged 6.48 percent.

Fixed mortgage rates for 15-year terms averaged 6.18 percent, a plunge from last week's average of 6.30. A year ago, the 15-year fixed-rate mortgage averaged 6.18 percent.

Averages for Treasury-indexed adjustable-rate mortgages (ARMs) also dropped this week. Five-year ARMs averaged 6.34 percent this week, down slightly from last week's average of 6.35 percent. At this time last year, the five-year ARM also averaged 6.14 percent.

One-year ARMs averaged 5.60 percent this week, an decrease from last week's average of 5.67 percent. Last year, the one-year ARM averaged 5.60 percent.
Freddie Mac said that to obtain these rates lenders charged an average 0.4-point fee for 30-year fixed-rate mortgages. Lenders charged a 0.5-point fee for 15-year fixed-rate mortgages. ARMs included a 0.6-point fee.

"Economic indicators released in the past week reflect slowing housing activity in July," said Nothaft. "Last month's housing starts dropped to the lowest level since January 1997 at an annualized pace of 1.38 million units, while one-unit housing starts experienced the fourth consecutive month of decline. Building permits also fell to the lowest level in nearly 11 years, and the number of one-unit permits issued was at the lowest since June 1995."

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.