Short-Term Rates Go The Other Way

Freddie Mac today released the results of its Primary Mortgage Market Survey® (PMMS®) in which the 30-year fixed-rate mortgage (FRM) averaged 5.88 percent with an average 0.5 point for the week ending April 3, 2008, up from last week when it averaged 5.85 percent. Last year at this time, the 30-year FRM averaged 6.17 percent.

The 15-year FRM this week averaged 5.42 percent with an average 0.5 point, up from last week when it averaged 5.34 percent. A year ago at this time, the 15-year FRM averaged 5.87 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 5.59 percent this week, with an average 0.6 point, down from last week when it averaged 5.67 percent. A year ago, the 5-year ARM averaged 5.92 percent.

One-year Treasury-indexed ARMs averaged 5.19 percent this week with an average 0.5 point, down from last week when it was 5.24 percent. At this time last year, the 1-year ARM averaged 5.44 percent

"While prime, conforming rates still remain at historically low levels, long-term mortgage rates did drift slightly upwards this week on signs that the economy may have a little more strength than what financial markets forecasted," said Frank Nothaft, Freddie Mac vice president and chief economist. "For instance, consumer spending in the fourth quarter of 2007 was revised upwards in the final estimate of Gross Domestic Product (GDP). More recently, February's personal income growth was the strongest since July 2007, and the ISM manufacturing index rose unexpectedly in March. Strong economic growth can lead to an up-tick in inflation fears, which tends to place upward pressure on mortgage rates; however, fears of economic recession, too, are putting pressure on the markets.

"Housing, however, still continues to be a drag on the economy. In 2007, residential fixed investment shaved nearly a full percentage point off of GDP, the most since 1980. In February, median existing house prices (excluding condominiums and co-ops) were 16.0 percent below the peak in June 2007 and median new home prices were 7.0 percent below the record set in March 2007. Moreover, new construction of one-family homes was 61.5 percent below its all-time recent peak in January 2006."