Mortgage Rates Fall to 14-Month Low

Mortgage rates remain in freefall with the average 30-year fixed rate mortgage falling to 6.08 percent, the lowest since Oct. 2005. 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. Fixed mortgage rates have now fallen for 4 consecutive weeks and five of the past six.

The average 15-year fixed rate mortgage, popular for refinancing, retreated to 5.83 percent. On larger loans, the average jumbo 30-year fixed rate slid to 6.36 percent. Adjustable rate mortgages got in on the act as well. The average 5/1 adjustable rate mortgage dropped below the 6 percent mark to 5.95 percent and the average one-year ARM inched lower to 5.88 percent.

Mortgage rates plunged this week following a report indicating the first contraction in the manufacturing sector since April 2003. The Institute for Supply Management's monthly index of manufacturing came in at a disappointing 49.5. Any reading below 50 indicates that the sector is contracting and is a bearish signal on the economy. Investors have seized upon any news of a softening economy to snap up bonds and drive yields lower, and mortgage shoppers have been the beneficiaries. Mortgage rates are closely related to the yields on long-term government bonds.

Fixed mortgage rates are sharply lower than five months ago, when rates were flirting with 7 percent. At that time, the average 30-year fixed mortgage rate peaked at 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 6.08 percent, the same loan originated today would carry a monthly payment of $997.76. Fixed mortgage rates are a compelling refinancing alternative for adjustable rate borrowers facing sharp payment adjustments.

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