Mortgage Rates Finally Fall

Written by: Steve Cook   Thu, January 7, 2010 Beyond Today's News, Market Trends

Rates for 30-year fixed mortgages switched gears this week, falling slightly for the first time in a month, but remained above last month’s record lows.

The average rate on a 30-year fixed mortgage was 5.09 percent this week, down from 5.14 percent a week earlier, Freddie Mac said Thursday.  Rates dropped to a record low of 4.71 percent in early December, pushed down by an aggressive government campaign to reduce consumers’ borrowing costs, but then rose steadily for the rest of the month.’s weekly national survey also found rates falling slightly.  The average conforming 30-year fixed mortgage decreased this week to 5.26 percent.  The average 30-year fixed mortgage has an average of 0.43 discount and origination points.

The average 15-year fixed mortgage fell to 4.67 percent in the Bankrate survey while the larger jumbo 30-year fixed rate inched lower to 6.14 percent. Adjustable rate mortgages were mixed, with the average 3-year ARM rising to 4.80 percent and the 5-year ARM dropping to 4.74 percent.

Mortgage rates started off 2010 by breaking a streak of five weekly increases. Optimism about the economy was the driving force behind December’s increase in mortgage rates, and heightened demand for the now higher-yielding mortgage-backed and government issued debt helped bring rates lower this week. Mortgage rates are closely related to yields on long-term Treasury securities and mortgage-backed bonds. The risks are clearly tilted toward higher mortgage rates in 2010 as continued improvement in the economy and a return to job growth are both consistent with higher - not lower - mortgage rates.

The last time mortgage rates were above 6 percent was Nov. 2008. At that time, the average rate was 6.33 percent, meaning a $200,000 loan would have carried a monthly payment of $1,241.86.

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