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Long-Term Mortgage Rates Decline Further

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TIMES STAFF WRITER

Mortgage rates, after spending nearly all summer at the lowest levels in more than three decades, are still falling and may not have bottomed yet.

Rates on 30-year loans dipped Thursday to an average of 6.15% from 6.22% a week earlier, according to a survey by secondary mortgage investor Freddie Mac. The decline marked the third time this summer that rates have sunk to a new low since the company began tracking mortgages on a weekly basis in 1971.

Investors, worried about the stock market and the sluggish economy, have been pouring money into government bonds, driving yields to generational lows. Mortgage rates tend to track government bond yields. On Thursday the 10-year Treasury note yield fell to a new 40-year low of 3.93%.

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Home loan rates are expected to stay between 6% and 6.37% through the end of the year, said Frank Nothaft, economist at Freddie Mac. For rates to fall sharply from current levels, he said, the economy would have to dip into a recession or receive some other shock.

“The rates should remain about where they are,” he said.

Or maybe go even lower, said James Nutter Jr., a mortgage executive in Kansas City, Mo. If the stock market gets worse, Nutter said, rates could hit 5.75% in coming months.

Though cheaper mortgages have made home buying more affordable nationwide, a new report suggests that a growing number of Californians are losing ground.

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The percentage of those able to purchase a median-priced home in July dropped to 28%, down from 32% a year earlier and unchanged from the previous month, the California Assn. of Realtors said.

Median prices, meaning half cost more and half cost less, in July hit a record $323,700. In Los Angeles County, the affordability rate fell to 31% from 35% a year earlier. An even sharper drop occurred in Orange County--to 22% from 28%.

But the index, which assumes a 20% down payment, does not take into account rising home equity that other analysts said could make move-up purchases more attainable.

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Despite expectations that the pace of transactions will slow in coming months, sales remain at a record rate in the U.S. and statewide, industry groups said. They believe cheaper financing will keep the market stable.

Falling rates also have put refinancings on a rapid clip, the Mortgage Bankers Assn. of America said. Homeowners seeking loans at a lower rate of interest accounted for 71% of total mortgage applications last week, about the same as a week earlier, the group said.

Rates fell on most other kinds of home loans this week, Freddie Mac said. The rate on 15-year fixed mortgages slipped to 5.56% from 5.64%. But a one-year adjustable-rate loan rose slightly to 4.35% from 4.34% last week. Those rates carried add-on fees of 0.6% this week.

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