The 30-year fixed-rate mortgage dropped below 6% on average this week, a seven-week low for the mortgage, according to Freddie Mac’s weekly survey, released on Wednesday.
The mortgage averaged 5.97% for the week ending Nov. 26, down from last week’s 6.04% average. The 30-year mortgage averaged 6.10% a year ago; it hasn’t been lower since Oct. 9, when it averaged 5.94%.
“Interest rates for 30-year fixed-rate mortgages fell for the fourth consecutive week as signs the overall economy is flagging lowered most interest rates market-wide,” said Frank Nothaft, Freddie Mac chief economist, in a news release. “And economic growth in the third quarter was revised downward this week, led by the first decline in consumer spending since the fourth quarter of 1991 and the largest drop since the second quarter of 1980.”
The 15-year fixed-rate mortgage averaged 5.74%, up slightly from last week’s 5.73% average. The mortgage also averaged 5.73% a year ago.
Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.86%, down from last week’s 5.87% average. They also averaged 5.86% a year ago. And 1-year Treasury-indexed ARMs averaged 5.18%, down from last week’s 5.29% average. The ARMs averaged 5.43% a year ago.
To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point, the 5-year ARM required an average 0.6 point and the 1-year ARM required an average 0.5 point. A point is 1% of the total mortgage amount, charged as prepaid interest.
The mortgage industry has gone through some a major overhaul recently, and there is more to come. The latest shoe to drop is the 100% financing / zero down mortgages. Not all of them are extinct, but don’t look to Fannie Mae or Freddie Mac to guarantee one. Now these mortgages are deemed a risky lending practice as house prices fall in many areas. Now they are deemed risky? That’s like gunshot wounds being deed risky now. Old milk? Risky now. Driving with your eyes closed? Research has shown that to be a risky behavior now, and should be avoided. But back when home prices were escalating out of sight, and many buyers were digging through their car seats for down payment money it wasn’t risky then? Creating “qualified” mortgage clients out of thin air and a wink wink and putting them in programs so far over their heads they could not see past the pre-payment penalty to come up for air was not risky? Making extra dollars from these people with elevated interest rates - because golden nuggets like 100% financing don’t come without a price - only to make more money on their necessary and eventual refi’s did not put the client at risk? Oh and the parting gift – you lose your house. We’ll explain negative equity and its dangers some other time, dear client. I must be really out of touch because I just can’t get my head around this one.
