Inflation Concerns Ease Temporarily, Florida Home Loan Rates Decline For the Week

Much of the U.S. economy is tied to the housing sector and everyone is watching interest rates keenly for hints as to where we’re headed.

The most recent indicator came in the form of a weaker-than-expected employment report released last Friday by the U.S. government, easing concerns about inflation somewhat. As a result, Florida home loan rates fell 0.05 percent in the past week, reports the Detroit Free Press.

In its weekly survey of the nation’s lenders, Freddie Mac reported Thursday that mortgage rates on 30-year, fixed-rate mortgages averaged 6.62 percent, down from 6.67 percent a week ago. The 6.67 average marked the highest mortgage rates in nearly four years for the industry’s benchmark home loan.

The decline was only the second in the past 11 weeks and still leaves the 30-year Florida mortgage more than a full percent above where it was at this point in 2005. The Florida housing market is showing signs of slowing due to the rising rates, with analysts predicting that national sales will decline by up to 10 percent this year.

Frank Nothaft, Freddie Mac’s chief economist, said the decline in rates reflected a report that the economy created just 75,000 jobs last month, the slowest increase in seven months and a sign that the U.S. economy is slowing.

While Federal Reserve Chairman Ben Bernanke jolted markets Monday when he said that inflation remains a major concern at the Fed, industry officials believe that future interest rate increases should be modest if upcoming inflation readings aren’t worrisome. Concerned about the continual rise of Florida home loan costs and the impact on business, real estate groups have been urging the Fed to cool it with the hikes.

Other home loan products followed suit this week, showing similar declines. Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a Florida home loan, fell from 6.26 percent to 6.23 percent this week. One-year adjustable-rate mortgages (ARMs) also were down for the week, falling to 5.63 from 5.68 percent, the highest level since August 2001.

Five-year adjustable-rate mortgages showed a similar decline, dropping from 6.26 percent to 6.20 percent. The mortgage rates included in the Freddie Mac survey do not include points, which averaged 0.5 last week among 30-year, 15-year and 5-year loans. One-year ARMs had an average of 0.8 points.

It was an interesting week for the industry, with a decline in mortgage applications throughout the U.S. stemming from the higher borrowing costs.

The Mortgage Bankers Association index of applications to buy a home or refinance an existing loan dropped 1.4 percent, the third straight such decline, and one that dropped the index to its lowest level in 2006.

Home buying stalled after having declined the prior two weeks, another sign of weakness in the housing market. Fewer purchases and smaller levels of cash from refinancing could mean a slower economy by later this year, many economists and pundits believe.

“What we’re seeing is the beginning of the breakdown of the housing market. Housing will detract from economic growth. It’ll affect refinancing and consumer confidence, and the impact will be seen in consumer spending,” said Joel Naroff, President of Naroff Economic Advisors in Holland, Penn.