Mortgage Rates Slip Beneath 7%; Surge in Applications Reported
Mortgage rates have fallen below 7% to their lowest level in more than two years, according to a national survey released Thursday by the Federal Home Loan Mortgage Corp., and lenders report a pickup in applications for home loans and mortgage refinancings.
“What we see is a lot of buyers getting prequalified. . . . A lot of offers are being accepted,” said Steve Abo, president of Brokers Preferred Mortgage in West Los Angeles. “For once, we have some real excitement going on in real estate sales.”
The advertised rate this week for a 30-year, fixed-rate mortgage averaged 6.94%, down from 7.02% last week, according to the Freddie Mac survey. The current rate is the lowest since the week ended Oct. 28, 1993, when the average rate was 6.86%, not including lending fees known as points.
On one-year, adjustable-rate mortgages, lenders were asking an average initial rate of 5.19%, down from 5.33% last week. Fifteen-year mortgages, a popular option for those refinancing mortgages, averaged 6.44% this week, down from 6.51% a week earlier.
Mortgage rates had risen to 9.25% on Dec. 15, 1994, before they began a long decline that has continued amid expectations that the national economy will be sluggish this year and inflation will not accelerate.
However, many Southern California homeowners are unable to take advantage of the lower rates because falling home prices have substantially reduced or eliminated their equity. Encino mortgage broker Bob Sheets of Golden West Mortgage estimates that 70% of customers looking to refinance cannot because of equity problems.
“It’s very demoralizing,” Sheets said.
The Freddie Mac survey was released on the same day that some government reports indicated unexpected strength in the U.S. economy, suggesting that further interest rate cuts by the Federal Reserve Board may be unlikely any time soon.
For example, the Commerce Department reported December orders for factory and durable goods that exceeded analyst expectations. As a result, yields on some key government bonds rose.
However, Earl Peattie, president of Mortgage News, a mortgage rate research firm in Orange County, said most economic indicators still seem to signal a weakening economy and lower rates.
“Everything seems to point to a weaker scenario,” Peattie said. “It sends a pretty strong message that rates will remain the same or could go down.”
At Pasadena-based Countrywide Funding Corp., loan applications for home purchases have remained strong nationwide even as the economy has shown signs of weakening, said Executive Vice President Joe Anderson.
“The underlying economy is not so healthy, but interest rates are low enough so that home sales are still brisk nationwide,” Anderson said.
Countrywide has also seen a significant uptick in refinancing activity, with many homeowners seeking to convert variable-rate mortgages into fixed-term mortgages, and many want to change their 30-year loans into 15-year mortgages to shorten their amortization.
“Those are two things that are happening at fairly brisk rates,” Anderson said.
Times wire services contributed to this report.
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Resurgent Refinancing
As mortgage rates have fallen over the last year, the number of refinancings as a percentage of all mortgages has tripled.
Nov.: 33%
Researched by JENNIFER OLDHAM / Los Angeles Times
Source: Bloomberg Business News
