Mortgage Trends This Week: Sept. 28

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Pity the poor three-year adjustable rate mortgage consumers, who must feel like they woke up on the wrong side of the balance sheet this morning.

Of the major mortgage rate indexes, three-year ARMs were the only category to rise – to 4.81% from 4.52% for the past week. The other key indexes continued their steady downward trajectory, as mortgage-backed security prices hit four-month highs (mortgage rates usually decline as mortgage-backed security prices rise) thanks to renewed concerns over the U.S. economic recovery, especially in housing.

Here are the weekly numbers, thanks to the BankingMyWay Weekly Mortgage Rate Tracker. Thirty-year fixed-rate mortgages dropped slightly to 5.26% from 5.28%. Fifteen-year fixed-rate mortgages basically held steady for the third week in a row, at 4.72%, while one-year and five-year ARMs dropped once again, to 4.26% from 4.77%% for one-year ARMs, and to 4.47% from 4.5% for five-year ARMs.

Feeding the rate decline was a major disappointment in U.S. housing sales, which triggered a flash stampede out of riskier stocks and into those safe-haven bond categories like U.S. Treasuries. That happened Thursday afternoon, after the release of a National Association of Realtors report showed a 2.7% decline in existing home sales, in stark reversal to the previous month, when existing home sales saw a sharp uptick. So, despite the $8,000 first-time homebuyers credit, and despite low mortgage rates, which have been artificially pumped up by the year-long Federal Reserve program to buy up mortgage paper, home sales just can’t find their footing. That’s a distressing sign not just for banks and the housing market, but for the economy in general.

While there is talk of the U.S. government extending the $8,000 tax credit – it expires Dec. 1 - that hasn’t happened yet. And the Fed’s credit stimulus buyback program, which traded big purchases in mortgage-related debt from financial institutions for lower mortgage rates (below 5% for a good chunk of 2009), is in its closing stages.

Without these two mortgage market drivers, will rates stay low – and will U.S. home purchases finally stabilize and move upward?

Those are the key questions mortgage industry professionals are asking themselves this week.

The answers, however, are elusive. And until we get those answers, don’t expect mortgage rates to rise at a sustainable rate anytime soon.

In the meantime, if you’re in the market for a home mortgage, rates remain historically low, as do home prices. Find the best possible deals on mortgage rates with the help of BankingMyWay’s Mortgage Rate Search.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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