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Economic Grays Send Mortgage Rates to New Lows

On the heels of disappointing news in the broader economy, mortgage rates fell precipitously alongside Treasury bond yields Thursday, with ""Freddie Mac"":http://www.freddiemac.com/ and ""Bankrate"":http://www.bankrate.com/ releasing reports that saw new lows for 30-year fixed-rate mortgages, 15-year rates, and 5-year adjustable-rate mortgages (ARMs). Economists blamed the declines on economic uncertainty and fallout from the debt-ceiling crisis.

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Publishing the ""Primary Mortgage Market Survey"":http://www.freddiemac.com/pmms/, Freddie Mac signaled the lowest pullback in 30-year fixed-rate mortgages for the year, with data for the category showing up at 4.39 percent on average, just down from 4.55 percent last week. These numbers neared a low reached in August last year when the 30-year fixed-rate mortgage dipped to 4.49 percent. Bankrate posted similar lows, with numbers for the 30-year fixed-rate mortgage slipping to 4.54 percent.

Among 15-year fixed-rate mortgages, Freddie reported the average sliding from 3.66 percent last week to 3.54 percent on average this week, hiding in the shadow of 3.95 percent reached by the same rates on average last year. For Bankrate, 15-year fixed-rate mortgages collapsed to 3.68 percent, a new low this year, with 5-year and 7-year ARMs following by dropping to 3.23 percent and 3.52 percent, respectively. Meanwhile, the company reported a fallback in 30-year jumbo loan rates to 5.06 percent.

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According to Freddie, ARMs in the 5-year category fell to 3.18 percent from 3.25 percent last week, while rates in the one-year category jumped to 3.02 percent from 2.95 percent last week.

""Treasury bond yields fell markedly after signs the economy was weaker than what markets had previously thought allowing fixed mortgage rates to follow this week with the 15-year fixed and 5-year ARM setting new historical lows,"" Frank Nothaft, VP and chief economist for Freddie, said in a ""statement"":http://freddiemac.mediaroom.com/index.php?s=12329&item=48837. ""The economy grew 1.3 percent in the second quarter, which was below the market consensus forecast, and first quarter growth was cut to less than a quarter of what was originally reported. In fact, the first half of this year was the worst six-month period since the economic recovery began in June 2009. Moreover, consumer spending fell 0.2 percent in June, representing the first decline since September 2009.""

Speaking to _MReport_, Greg McBride, senior financial analyst for Bankrate, attributed the declines in mortgage rates to the weaker-than-expected economic results.

""Mortgage rates have fallen sharply, because with the debt being increased, we're back to focusing on the weak economy,"" he said.

""Increasing the debt ceiling removed one cloud of uncertainty but a recent barrage of poor economic data has only generated greater uncertainty regarding the health of the economy,"" he said.

Nothaft added a positive note, saying ""there were indications that the housing market is firming. Real residential fixed investments added growth to the economy in the second quarter after subtracting from growth over the first three months of the year,"" he said. ""The ""CoreLogic"":http://www.corelogic.com/ National House Price Index rose for the third straight month in June (not seasonally adjusted) and was the first three-month gain since June 2010. Finally, pending existing home sales rose for a second consecutive month in June and was up nearly 20 percent from June 2010 when the housing tax credits expired.""

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.
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