Posted on: Friday, July 23, 2004
Rates at 3-month low for 30-year mortgages
By Courtney Schlisserman and Joe Richter
Bloomberg News Service
The average rate on a benchmark 30-year fixed mortgage fell to 5.98 percent this week, the first time since April it's been below 6 percent, according to Freddie Mac.
The decline from 6 percent a week earlier was the fifth straight decrease. The rate was the lowest since 5.94 percent for the week ended April 23 and four basis points above the year-ago level, according to McLean, Va.-based Freddie Mac.
Mortgage rates should increase at a "measured" pace the rest of the year as the economy continues to expand, Freddie Mac Chief Economist Frank Nothaft said. Freddie Mac this month raised its forecast for home sales this year to a record 7.33 million, from the previous expectation of 7.25 million.
"Mortgage rates still remain at a very low level historically," said Rick MacDonald, an economist at Action Economics, from his office in Los Angeles. "As long as interest rates remain low, as long as the job market remains strong, the housing market historically has been a good sector."
The one-year adjustable rate rose to 4.12 percent this week from 4.02 percent, Freddie Mac said. The 15-year fixed rate declined to 5.39 percent from 5.40 percent.
Mortgage rates move in line with yields on U.S. Treasury notes. The yield on the 10-year Treasury is expected to rise to 5.1 percent by the fourth quarter from an average 4.29 percent in the year's first half, according to the median estimate of 53 economists in a Bloomberg News survey from June 25 to July 6.
Freddie Mac is the second-biggest purchaser of U.S. mortgages. Fannie Mae is the largest.
At the current 30-year fixed mortgage rate, the monthly payment on a $100,000 loan would be $598.27. That compares with $549.73 in June of last year, when mortgage rates reached a record low of 5.21 percent.
"As interest rates go up, the economy does better," said Donald Tomnitz, chief executive of D.R. Horton Inc. "That is the best thing that could happen for our industry because this creates more buyers for us."
Higher mortgage rates have hurt banks as fewer homeowners refinance loans. The Mortgage Bankers Association index of refinancing has declined 60 percent over the past year and fell by 11 points to 1651.1 in the week ended July 16.
Countrywide Financial Corp., the biggest U.S. mortgage lender, said today its home lending tumbled 23 percent as rising interest rates discouraged homeowners from refinancing loans.
The lender's total loan production volume last quarter declined to $100 billion. Although purchase funding, or loans to buy houses, rose 40 percent to $46 billion, refinance volume fell 45 percent on higher rates, the Calabasas, Calif.-based company said without providing a figure for refinance volume.
D.R. Horton, the third-largest U.S. homebuilder by stock market value, raised its profit forecast for the fiscal year to as much as $3.85 a share from an earlier estimate of $3.55.
Builders such as D.R. Horton and industry leader Lennar Corp. likely will sell 1.17 million new homes this year, a gain of 7.4 percent from last year, the National Association of Home Builders in Washington said.
