Continued Low Mtge Rates Fail To Spur Housing Demand -Freddie

By Amy Hoak

Mortgage rates held steady this week amid mixed reports about the slowing economy, Freddie Mac's chief economist said on Thursday.

"Both the core producer price and consumer price indexes ticked up in January, higher than the market consensus, while consumer confidence in February fell to the lowest reading since records began in January 1967," said Frank Nothaft, Freddie Mac chief economist, in a news release.

Thirty-year fixed-rate mortgages averaged 5.07% for the week ending Feb. 26, up from last week's 5.04% average but still lower than their 6.24% average a year ago, according to Freddie Mac's weekly survey of conforming rates. Meanwhile, 15-year fixed-rate mortgages averaged 4.68%, unchanged from last week, and down from 5.72% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.06% this week, up from 5.04% last week; the ARMs averaged 5.43% a year ago. One-year Treasury-indexed ARMs averaged 4.81% this week, up slightly from 4.80% last week; the ARMs averaged 5.11% a year ago.

To obtain the rates, the fixed-rate mortgages and the five-year ARM required payment of an average 0.7 point, while the one-year ARM required an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

"Lower house prices and affordable mortgage rates have yet to spur housing demand," Nothaft said in the news release.

"For instance, house prices declined by 8.7% for the 12 months ending in December 2008 and were down 10.9% from their highs set in April of 2007, according to the Federal Housing Finance Agency's purchase-only monthly home price index.

"However, existing home sales (excluding condominiums and co-ops) fell 4.7% in January to 4.05 million units (annualized), the slowest pace since July 1997," he said.

The Mortgage Bankers Association on Wednesday said that mortgage rates rose last week, and the volume of mortgage applications fell a seasonally adjusted 15.1%, compared with the week before.

-Amy Hoak; 415-439-6400; [e-mail]