Mortgage bankers' prayers have been answered.
For most of this year, lenders watched with dismay as longterm interest rates steadily moved up, crimping loan demand. Now, economists and bankers say, the long climb appears to be over - at least for now.
Following bond yields, the average offer rate on 30-year fixed mortgages fell 18 basis points last week, to 8.72%, according preliminary survey results from HSH Associates, Butler, N.J. That was only the third weekly drop since early February.
Many mortgage executives are now expressing confidence that fixed rates will remain in the 8% range for some time.
Inflation Fears Eased
"We are at the beginning of a stabilized time," said Cathy Neubert, senior vice president of
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Last week's drop in fixed mortgage rates came after the Federal Reserve lifted two shortterm rates, the discount rate and the federal funds rate. The Fed's action eased inflation fears and, as a result, caused long-term yields to decline sharply.
Not all mortgage rates were down last week. Adjustable loans, which are pegged to shortterm yields, were offered at at average of 5.69% last week, up 16 basis points from the previous week, according to HSH. That could hurt thrifts, which have been making a concerted effort to book more adjustables. But the news was clearly good for mortgage banking concerns, which generally specialize in fixed-rate loans.
Relief Over Fixed Rates
Mortgage bankers expressed relief that fixed rates have apparently stopped their rise toward the 9% level.
"It's an 8% market," said Patrick Sandlin, president and chief executive officer, Community Mortgage Corp., Memphis. "Psychologically, we rely on an 8% market."
He said that homebuyers should be encouraged by the current rates. But few mortgage bankers are expecting a significant pickup in refinancings transactions that lifted the market to record heights last year. An index of refinancing applications, calculated by the Mortgage Bankers Association of America, fell for the 14th straight week, to 190.7. That's far from the peak of 1727.3 reached last fall.