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Mortgage Rates Drift Lower for Third Straight Week
With some encouraging signs that inflation is continuing to head in a direction that will eventually make it less a concern for the Federal Reserve, long-term mortgage interest rates have drifted lower for the third consecutive week.
The 30-year fixed-rate mortgage averaged 6.63% for the week ending on July 3, down from an average 6.67% the previous week, according to Freddie Mac's Primary Mortgage Market Survey. The 30-year rate averaged 6.79% a year earlier.
The 15-year fixed-rate mortgage averaged 6.30% last week, down from 6.34% the previous week and 6.44% for the same period of 2006.
One-year Treasury-indexed adjustable-rate mortgages averaged 5.71%, down from 5.65% for the prior week and 5.83% one year earlier.
Frank Nothaft, chief economist for Freddie Mac, attributed the downward drift in mortgage rates in part to moderation in core inflation. “In the statement accompanying their decision to leave the target federal funds rate unchanged, the Fed noted that core inflation had declined recently, though a ‘sustained’ moderation is still to be seen, and signaled that inflation risk continues to figure in their policy decisions,” he said.
“Helping to ease some inflation concerns, May’s personal consumption expenditures report found that the core price measure had increased 1.9% for the year ending in May, within the 1% to 2% range with which the Fed is comfortable, and the lowest year-over-year rise in more than three years,” Nothaft said.
While most analysts have concluded that the Fed is unlikely to reduce the federal funds rate anytime soon, an ongoing decline in inflation would in effect increase the real cost of borrowing, putting pressure on the Fed to reduce interest rates to keep their monetary policies from becoming more restrictive.
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 NAHB Kit Gives Builders Back-to-Basics Tips in Cooling Market
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