Mortgage Rates Fall Sharply This Week (Even if No One Noticed)

Even after it was reported that mortgage applications fell by 3.3 percent over the past week and are now 11.2 percent lower than the same week last year, home mortgage rates are heading downhill — against conventional wisdom that lower rates suggest that would spark more demand.

The average rates of 30-year, fixed-rate mortgages fell by 0.15 percent to 6.31 percent, according to Bankrate.com. The mortgages in the site’s weekly survey had an average total of 0.25 points.

For all the talk of fluctuating rates, things haven’t changed much in the last month… or 12 months. One year ago, mortgage rates for 30-year, fixed-rate loans came in at 6.37 percent. A month ago, the rates were exactly where they are right now, at an average of 6.31 percent.

The 15-year, fixed-rate mortgage, a popular home mortgage loan refinance option fell 0.14 percent to 6.02 percent. Meanwhile, the 5/1 adjustable-rate mortgage (ARM) experienced a similar drop, falling by 0.15 percent to end the week at 6.13 percent.

It’s puzzling to some economists why mortgage costs are on the decline at the same time reports seemed to be signaling that the economy was going through an icy patch. When it looks like the economy is about to slow, long-term interest rates tend to fall. But the stock market is booming, gas prices down, and consumer confidence actually up.

What’s going on? Bob Moulton, a broker who laments the lifelessness of the mortgage business, says most of the signs are good.

“Rates are great. The stock market is at an all-time high. Gas prices are down,” says Moulton, president of Americana Mortgage. “A year ago, home mortgages were down and everyone was attributing that to high gasoline prices and rising long-term home mortgage rates. The excuses are gone, but the problem persists.”

Moulton guesses that, believe it or not, people are too busy to pay close attention to the daily and weekly fluctuations of mortgage rates.

They pay attention to the moves by Ben Bernanke and the Federal Reserve, “not really appreciating how long-term rates vary differently from what the Fed does.”

And how. The Fed raised short-term interest rates 17 times in a row over two years and finally stopped at its August 8 policy meeting, keeping the nation’s interest rates steady at 5.25 percent.

The federal funds rate has remain unchanged since then, while mortgage rates have slipped about 0.30 percent. Some experts worry that a lot of homeowners don’t know this and are missing opportunities to refinance.

What’s next? Stay tuned. Below is a look at how this week’s mortgage costs stack up. Figures indicate what you would pay for a $165,000 home loan.