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U.S. Mortgage Rates drop

July 26th, 2007 6:26 PM

U.S. mortgage rates drop

Marketwatch - July 26, 2007 11:40 AM ET

CHICAGO (MarketWatch) - Mortgage rates dropped this week, with Freddie Mac attributing the fall to market concerns of continued weakness in housing demand.

Data released Thursday showed the 30-year fixed-rate mortgage averaging 6.69% for July 20-26, down from the previous week's 6.73% average. The mortgage averaged 6.72% a year ago. The 15-year averaged 6.37%, down slightly from last week's 6.38% but above 6.34% a year ago.

The softening rates came after further evidence of sluggish housing demand, Freddie Mac vice president and chief economist, Frank Nothaft, said Thursday.

"For example, building permits fell last month to the slowest pace in a decade, and more recent data on June sales of existing home showed a fourth consecutive monthly decline," he said in a news release.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 6.30%, down from last week's 6.35% average and below 6.35% a year ago. The one-year Treasury-indexed ARM averaged 5.69%, down from last week's 5.72% and below 5.78% a year ago.

To obtain the rates, the 30- and 15-year fixed-rate mortgages, along with the five-year ARM, required payment of an average 0.4 point. The one-year ARM required payment of an average 0.5 point. A point is 1% of the total loan amount, charged as prepaid interest.

Rates easing from previous highs

Increases in mortgage rates last month may have contributed to the continued sluggishness in housing, Nothaft said.

"Several factors contributed to the softening in housing markets this spring," Nothaft said. "In addition to the tightening of lending standards earlier this year -- especially on subprime loans -- the 40-basis-point jump in rates on 30-year fixed-rate mortgages in June may have deterred potential buyers."

According to a separate survey by the Mortgage Bankers Association, mortgage application volume was down a seasonally adjusted 3.6% last week, compared with the week before. See full story.

So far this year, mortgage brokers have been closing fewer non-traditional or subprime loans than they did in 2006, according to a report earlier this week from the National Association of Mortgage Brokers.

Subprime loans made up an 11% share of all mortgages offered in April, NAMB said, while in 2006, 13% of mortgage loans were subprime.

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Heath Lefort

Posted by Heath Lefort - Personal Financial Advisor on July 26th, 2007 6:26 PMPost a Comment (0)

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10-year yield falls below 5% on Bernanke, subprime concerns by Heath Lefort

July 18th, 2007 4:31 PM

10-year yield falls below 5% on Bernanke, subprime concerns

Marketwatch - July 18, 2007 4:19 PM ET

NEW YORK (MarketWatch) -- Treasury prices rose sharply Wednesday, pushing the yield on the benchmark 10-year note below 5%, on renewed concerns over the U.S. subprime mortgage market and after the Federal Reserve Chairman said that core inflation should edge lower.

Two Bear Stearns Cos. hedge funds that made big bets in the subprime mortgage market are worth virtually nothing, according to a letter the investment bank sent to clients. Fed Chairman Ben Bernanke told Congress that the situation would likely get worse before getting better. See full story.

"Subprime jitters and worries of another credit meltdown are keeping yields in check," said Kevin Giddis, managing director of fixed-income at Morgan Keegan.

The benchmark 10-year Treasury note ended 10/32 higher at 96 02/32, while its yield $TNX stood at 5.012%, down from 5.077% late Tuesday. Bond prices move inversely to their yields.

In intraday trading, the 10-year's yield had dropped as low as 4.991%, the lowest level since July 3.

The 30-year bond rallied 19/32 to 94 21/32 with a yield $TYX of 5.103%.

On the short end, the 2-year note finished up 3/32 at 100 02/32 with a 4.835% yield.

Bond-bullish

Bernanke, in prepared testimony to the House Financial Services Committee, said that core inflation "should edge a bit lower, on net, over the remainder of this year and next year."

"If energy prices level off as currently anticipated, overall inflation should slow to a pace close to that of core inflation in coming quarters," he said. See full story.

On growth, the Fed chairman said the economy should expand at a "moderate pace" over the second half of 2007 and "strengthen a bit" next year.

"In terms of marginal shift in rhetoric, the prepared testimony is bond-bullish," said T.J. Marta, fixed-income strategist at RBC Capital Markets.

"The statement expressed concern that housing correction might continue longer than expected and weigh on spending," he said.

Subprime worries

The ABX "BBB" 07-1 index, which measures subprime-related bonds, sank to a fresh low amid persistent worries about deteriorating loans in that industry.

Following the reports on Bear Stearns, Punk Ziegel & Co. analyst Richard Bove downgraded the top Wall Street firms to sell from market perform, including Goldman Sachs (GS), Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley (MS).

In addition, credit-ratings agency Moody's put the ratings of 13 tranches of eight deals from Bear Stearns on review for possible downgrade. These deals are mostly backed by Alt-A mortgage loans, which are a step higher in quality from subprime loans.

Consumer prices

Earlier, government bonds also found support after government reports showed as-expected core consumer prices.

U.S. consumer prices increased a moderate 0.2% in June, with falling energy prices offsetting rising food prices, Labor Department data showed. Excluding volatile food and energy prices, the core consumer price index also increased 0.2%. Economists had been expecting the headline CPI to rise 0.1% and the core rate to rise 0.2%. See full story.

Separately, the Commerce Department said U.S. housing starts rose in June, beating analysts' expectations, but building permits fell, pointing to a mixed housing picture last month. See full story.

Starts of new homes rose by 2.3% to 1.467 million, the quickest pace since April. Building permits, considered a forward-looking housing indicator, sank by 7.5% in June to an annualized pace of 1.406 million. Analysts surveyed by MarketWatch had expecting starts to fall to 1.45 million and permits to drop to 1.48 million.

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Posted by Heath Lefort - Personal Financial Advisor on July 18th, 2007 4:31 PMPost a Comment (0)

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