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Mortgage Rates Settle on Lower Inflation Worries

By sbup Staff

Mortgage rates dropped one-fifth of a percentage point over the past seven days, according to the manybanking.com Mortgage Rate Index.

Interest rates on 30-year fixed-rate mortgages (FRMs) averaged 5.26% for the seven days ending March 12, down from an average of 5.45% on March 5. Rates on 15-year FRMs were also down, dropping to an average of 4.94% from last week's average of 5.02%.

The drop in mortgage rates erased the moderate rise in rates in the seven days ending March 5. "Mortgage rates had room to ease this week following news of a weaker jobs market, which may slow consumer spending and keep inflation at bay," said Frank Nothaft, vice president and chief economist at Freddie Mac, in a written statement.

Meanwhile, interest rates on adjustable-rate mortgages (ARMs) were mixed, with averages rates on one-year and three-year ARMs rising 0.19 and 0.04 percentage points to 5.58% and 5.80%, respectively. The average for five-years ARMs dropped one-third of a percentage point to 5.35%.

The drop in rates is likely to benefit both homeowners and homebuyers. "Given the recent historically low mortgage rates, homeowners have a strong incentive to try and refinance," says Nothaft. And many homeowners are taking advantage of that incentive -- two-thirds of all mortgage applications are refinancings, according to the latest survey by the Mortgage Bankers Association.

Meanwhile, homebuyers are faced with record high housing affordability. According to the National Association of Realtors' most recent data, the housing affordability index in January was 167.1. (A value of 167 in the index means that the median household income has 167% of the necessary income to afford the median-priced home.) That value represents a significant increase from 130, the average index value from the 12 months prior.

If you have good credit and are considering either refinancing or buying a new home, check out local mortgage rate offers by entering your ZIP code at manybanking.com.

For instance, residents of Indiana can apply for 30-year FRMs with interest rates of 5.375% from U.S. Bank (Stock Quote: USB), 5.625% from KeyBank (Stock Quote: KEY) or 5.125% from JPMorgan Chase (Stock Quote: JPM).

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