Bankrate: Economic News Depresses Mortgage Rates

Concerns about slower economic growth and a surprising dip in consumer confidence helped push mortgage rates lower this week. Mortgage rates dropped back to levels last seen one month ago, with the average 30-year fixed rate retreating to 6.31 percent. According to Bankrate.com's weekly national survey of large lenders, the 30-year fixed rate mortgages had an average of 0.25 discount and origination points.

The average 15-year fixed rate mortgage, popular for refinancing, fell to 6.02 percent, from 6.16 percent last week. On larger loans, the average jumbo 30-year fixed rate slid to 6.59 percent. Adjustable rate mortgages also declined. The average 5/1 adjustable rate mortgage backpedaled to 6.13 percent and the average one-year ARM descended to 5.92 percent.

The economic slowdown was evident in the initial estimate of third quarter economic growth, with the Gross Domestic Product growing by an annualized pace of 1.6 percent. A popular gauge of the manufacturing sector, the Institute for Supply Management Index, fell to a three-year low. Even consumer confidence dipped despite a rising stock market and lower gasoline prices. A slower moving economy increases investor demand for bonds, with prices rising and yields falling. Mortgage rates are closely related to yields on long-term government bonds.

Fixed mortgage rates are sharply lower than four months ago, when rates were flirting with 7 percent. At that 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 6.31 percent, the same loan originated today would carry a monthly payment of $1,022.38. Fixed mortgage rates are a compelling refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.

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