Mortgage applications decline in 4 of past 5 weeks

Bloomberg News
Originally published January 30, 2005

Mortgage applications have fallen for the fourth time in five weeks, reflecting declines in home purchases and refinancing, a private group's survey found. The Mortgage Bankers Association gauge dropped 3.6 percent to 658.1 in the week that ended Jan. 21 from 682.9. The group's purchase index fell 2 percent to 439 and the refinancing measure decreased 5.7 percent to 1932.8.

Both indexes are below last year's averages and suggest the economy won't get as much of a boost from refinancing and home sales this year as it did in the prior two years.

"The housing market's success in 2004 will partially impinge upon its potential success this year," said Ken Mayland, president of ClearView Economics LLC in Pepper Pike, Ohio. "I see a very gradual reduction in activity."

The mortgage bankers survey covers about 50 percent of all retail residential mortgage originations and has been conducted weekly since 1990. The base period is March 16, 1990, when the value for all indexes was 100.

Thirty-year mortgage rates below 6 percent helped make 2004 a record year for home sales. Economists said that though rates are rising, they will likely remain relatively low.

The Federal Reserve's Open Market Committee is expected to raise the federal funds rate a quarter point to 2.5 percent when it meets this week, based on the median forecast of economists surveyed by Bloomberg News.

"Low inflation and the expectation that the Fed will be able to keep inflation low are two reasons to expect that long-term interest rates will remain low," said Stephen Gallagher, chief economist at French bank Societe Generale in New York.

Gallagher predicted that 30-year fixed mortgage rates will rise to between 6.25 percent and 6.5 percent this year.

"When mortgage rates move above 7 percent, we should start to see zero price appreciation," Gallagher said. "That's when the housing market should really develop some weakness."

Refinancing applications have slowed as mortgage rates increased from the low in June 2003. Refinancing's share of overall applications fell to 46.5 percent from 48.9 percent for the week that ended Jan. 21.


Copyright © 2005, The Baltimore Sun

Mortgage rates mostly lower

NEW YORK (CNN/Money) - Longer-term mortgage rates ticked slightly lower this week ahead of key economic data, Freddie Mac said Thursday.

The average rate on 30-year fixed-rate mortgages eased to 5.66 percent this week, with an average 0.6 of a point payable up front, down from 5.67 percent last week. A year earlier, the rate on the 30-year fixed-rate loan stood at 5.68 percent.

The average 15-year mortgage rate pulled back to 5.14 percent, with a 0.6 percent payable up front, from last week's 5.15 percent. The rate averaged 4.97 percent a year ago.

"Until the market gets a better read of how the economy performed at the end of last year and how the Fed interprets that information, interest rates will likely remain calm," said Frank Nothaft, Freddie Mac vice president and chief economist. "And it should get that read when fourth-quarter Gross Domestic Product (GDP) is released tomorrow."

"Further, the Fed will release its policy statement next week, giving financial markets a better sense of what future actions the Fed may be contemplating. All of this will help determine where mortgage rates will be in the near future."

Elsewhere, five-year adjustable-rate mortgages (ARMs) averaged 5.02 percent, with an average 0.6 point, versus 5.05 percent last week. No data is available for a year-earlier comparison.

One-year ARMs advanced to a 4.18 percent average from 4.11 percent last week. The loans call for 0.8 of a point up front. At this time last year, the one-year ARM rate averaged 3.59 percent.

Freddie Mac's (up $0.43 to $66.08, Research) average mortgage rates are based on a survey of 125 lenders nationwide.

Mental-health patients likely to get equal health insurance coverage

After eight years of futility, advocates for the mentally ill are primed to finally get equal treatment from health insurance.

So-called mental-health parity is on a fast track in the Democrat-controlled state Legislature, with a vote scheduled for today in the House. Gov. Christine Gregoire has indicated her support. Even opponents are resigned to the law's eventual enactment.

The premise is simple: Psychiatric disorders should be covered by insurance at the same level as physical ailments, with no special caps or extra co-payments. At least 35 other states — as politically disparate as California and Mississippi — already have versions. However, exemptions to the measure could limit who benefits.

The Office of the Insurance Commissioner was unsure yesterday how many people would be covered. But mental-health coverage would be assured for 300,000 public employees, and nearly 100,000 low-income people on the Basic Health Plan, raising state health-care costs by about $2.5 million a year.

Not included under the legislation would be insurance plans for businesses with 50 or fewer employees; self-insured companies, such as Boeing and Microsoft; and plans purchased by individuals. Substance-abuse treatment, marital counseling and residential treatment also would not be covered by the measure.

Federal employees already get parity for mental-health care through a 1996 bill signed by President Clinton.

Health insurers and business groups have fought the state bill with arguments that it would raise premiums for private employers across the state up to 5 percent, and would lengthen the 47-item list of treatments mandated for coverage.

But supporters, including Sen. Karen Keiser, chairwoman of the Senate Health and Long-term Care Committee, dispute such predictions, and argue the impact would be minimal compared with the human toll of untreated illness. The measure, Keiser said, would help her niece, who is mentally ill and has bounced from emergency room to emergency room.

"Every time someone goes through a crisis, they lose a little bit of their soul," said Keiser, D-Kent. "They never come back all the way."

The bill to be voted on in the House today, HB 1154, would phase in from 2006 to 2010 a mandate that psychiatric treatment be covered at the same level as

medical and surgical treatments.

The Association of Washington Health Care Plans, which includes the state's 10 largest insurers, estimates mental-health parity would boost premiums 4 to 5 percent in plans that currently have no mental-health coverage. For plans with some mental-health coverage, the increase would be about 1 percent, said Sydney Smith Zvara, the association's director.

It would be tough for some employers to absorb higher insurance costs after three years of double-digit increases, she said. "On top of the already existing mandates, our purchasers are saying 'enough already,' " she said. "Anytime we add on a mandate, there are employer groups who say they can't provide it and will drop coverage."

Jon Bridge, co-CEO of Ben Bridge Jeweler, voluntarily began offering his 800 employees mental-health parity more than 10 years ago. "It hasn't added any extra costs that I can tell," he said. "It isn't used a lot, but it was something we felt should be provided if you are going to provide medical care."

Mental-health parity has been considered but rejected by the Legislature each session since 1998 because of the stigma attached to mental illness and misperceptions about costs, said Randy Revelle, chair of the Washington Coalition for Insurance Parity.

"There has been a revolution over the last 10 to 15 years in terms of treatment and our ability to manage the costs of mental illness," said Revelle, a former King County executive who has publicly described his own struggle with bipolar disorder.

Almost all insurance plans offered in the state discriminate against the mentally ill, he said, by requiring higher co-pays or allowing fewer days in the hospital than for physical disorders.

Offering parity is sound fiscal policy, Revelle said, citing higher worker productivity and reduced costs of incarceration and emergency care.

Ree Sailors, Gregoire's health-policy adviser, agrees. She cites a study of Fortune 500 companies that links mental-health coverage to fewer employee sick days.

"It's enlightened," she said. "If Fortune 500 companies say we put this in and it's saving us, why wouldn't we want to do it too?

"But the other side is we're in a hell of a mess with revenues and demands," she said. "It's a gruesome task to deal with this $1.8 billion [budget] shortfall."

The bill being voted on today in the House zipped through the Financial Institutions and Insurance Committee nine days after it was introduced. It is scheduled for a hearing in a Senate committee in mid-February.

Mellani McAleenan, of the Association of Washington Business, which opposes the bill, hopes to slow the process by focusing on the financial cost of parity rather than personal anecdotes.

"When you feel so emotional about something, you may not be swayed by the facts and figures," she said. "That's tough, but that's a position we definitely find ourselves in."

Keiser said the bill was not a "slam-dunk" in the Senate, but it has broad support in the Democrat majority. "People down here know how to count heads," she said. "I think it has the best chance ever."

SignOnSanDiego.com > News > Business -- Mortgage rates edge lower

January 28, 2005

Rates on 30-year mortgages fell for a fourth straight week as investors waited to see what the Federal Reserve will do next week with interest rates.

Freddie Mac's weekly nationwide survey showed that rates on 30-year, fixed rate mortgages averaged 5.66 percent, down from 5.67 percent a week earlier.

Rates on 15-year, fixed-rate mortgages dipped to 5.14 percent from 5.15 percent. Rates on one-year adjustable-rate mortgages rose to 4.18 percent from 4.11 percent. Five-year hybrid adjustable rate mortgages tell to 5.02 percent from 5.05 percent.

The rates do not include add-on fees known as points. The 30-year, 15-year and five-year mortgages each carried a 0.6 point fee. The one-year ARM carried a 0.8 point fee.

Fed policy-makers will hold their first meeting of 2005 on Tuesday and Wednesday and it is widely expected they will increase a key short-term rate for the sixth time since last June, moving it up by another quarter-point.

Associated Press

National City Mortgage and ServiceLink Form a Joint Venture

MIAMISBURG, Ohio, Jan. 27 /PRNewswire-FirstCall/ -- In a joint statement released today, National City Mortgage, Inc. and ServiceLink, L.P., announced the formation of a joint venture to be known as NationalLink, L.P. NationalLink combines one of the nation's leading residential lenders with one of the leading closing management companies. The new company will be located in Aliquippa, Pennsylvania, which is also where ServiceLink, L.P. is headquartered. National City Mortgage, Inc. is headquartered in Miamisburg, Ohio.

Rick Smalldon, President and COO, of National City Mortgage stated, "NationalLink provides us with a unique opportunity to offer better customer service, cost-savings and efficiencies in our process." The company will provide appraisal, title and closing management services to borrowers on a nationwide basis.

"We are very pleased to have the opportunity to partner with National City Mortgage in the venture," noted Jeff Coury, CEO of ServiceLink. "Our companies share a commitment to creating an outstanding customer experience. NationalLink will focus on compressing the time to close loans while maintaining the ServiceLink quality standard and will operate as a seamless extension of National City Mortgage's loan fulfillment operations."

Pete Krysik, President of National City Abstract, an affiliate of National City Mortgage, began his search for a technology solution to fulfill his closing needs. "In order to control the closing process, I knew that technology was the key. We would have to build it, buy it or partner with a company that has developed it," stated Krysik. To Krysik, the relationship with ServiceLink was the appropriate decision, because of their best-in-class settlement service software and their dedication to customer service. "We determined that creating NationalLink will take us to the next level, something we could not achieve on our own."

NationalLink commenced operations on January 3, 2005.

About National City Mortgage

National City Mortgage (NCM) originates residential real estate loans through National City's more than 1,200 bank branches as well as through a network of more than 500 wholesale and retail offices located in 43 states. These loans are ultimately sold to primary mortgage market aggregators with the servicing of loans retained in the National City family. National City is recognized as one of the top 10 lenders to minorities in the United States as well as one of the top residential originators and servicers nationally. National City Mortgage's Web site can be found at: http://www.nationalcitymortgage.com/ .

About National City

National City Corporation , headquartered in Cleveland, Ohio, is one of the nation's largest financial holding companies. The company operates through an extensive banking network primarily in Ohio, Illinois, Indiana, Kentucky, Michigan, Missouri and Pennsylvania, and also serves customers in selected markets nationally. Its core businesses include commercial and retail banking, mortgage financing and servicing, consumer finance and asset management. For more information about National City, visit the company's Web site at NationalCity.com.

National City Corporation

RisMedia.com - Mortgage Bankers Are Projecting Strong Economic Growth Through 2007

RISMEDIA, Jan. 28 – The Mortgage Bankers Association (MBA) is projecting strong economic growth through 2007, with gross domestic product (GDP) growing at a trend rate of about 3.5 percent in real terms annually.

MBA released its long-term economic forecast for 2005, 2006 and 2007 during its annual State of the Real Estate Finance Industry.

"The year 2005 looks to be a strong one, with GDP growing slightly above trend at 3.6 percent, down somewhat from the 4.4 percent growth rate of 2004. This will result in continued strength in employment and a strong but modestly slowing housing market. We see the job market getting stronger, even with continued strong--though slightly slower--gains in productivity. There will likely be a slight uptick in the inflation rate in 2005, which will support the Fed's continued march upward with the fed funds target as the Fed maintains focus on its No. 1 objective of keeping inflation at bay," said Doug Duncan, MBA chief economist and senior vice president, research and business development. "Long-term rates will therefore remain quite low and thus supportive of real estate finance activity, whether residential or commercial."

Duncan added that, "Long-term rates should increase from current levels by 50 to 65 basis points by the end of 2005, and another 25 to 35 basis points during 2006, finally reaching about 7 percent for a 30-year, fixed-rate mortgage by the end of 2007. Coming off a fairly steady rate environment in 2004, these are very modest interest rate increases for the level of economic growth we are expecting."

Following are the key points of the latest MBA forecast:

· Real GDP growth will average 3.5 percent during 2005, and 3.6 percent in 2006 and 3.5 percent in 2007.

· The unemployment rate will decline from the current level of about 5.4 percent to 5.2 percent by the middle of 2007.

· The 10-year Treasury rate will rise to an average of 4.7 percent by the fourth quarter of 2005 and 4.9 percent during the fourth quarter of 2006, and reach 5.3 percent during the fourth quarter of 2007. Mortgage rates will follow a similar pattern.

· Existing-home sales will come off record levels and fall by 7.2 percent in 2005, another 7 percent in 2006 and a bit more than 1 percent in 2007. At that pace, sales in 2007 will be at the then record level of 2002.

· New-home sales will fall by 6.1 percent in 2005, by 10 percent in 2006 and another 3 percent in 2007, again at the record level of 2002.

· In addition, home-price growth is expected to be less rapid, with existing-home prices increasing 4.7 percent during 2005 and new-home prices increasing 3.7 percent. Price increases in 2006 and 2007 are expected to be in the 3 percent to 4 percent range.

· Residential mortgage originations for both purchase and refinance loans will be down modestly from the second biggest year on record in 2004. Purchase loans will total $1.559 trillion in 2005, decline slightly to $1.517 trillion in 2006 and then rise to $1.556 trillion in 2007.

· Residential refinance loans will total $983 billion in 2005, $689 billion in 2006 and $559 billion in 2007.

· Total residential mortgage production in 2005 will be $2.542 trillion, basically tied with 2002 for the third-biggest year ever.

· The 2005 multifamily market will be similar in volume to 2004's market. Brisk property sales and refinancings are the underlying themes. This will be the front of an elevation of refinance activity due to the maturing of a significant volume of loans made a decade ago.

· It appears from preliminary data that mortgage bankers originated a record volume of commercial loans in 2004. Commercial mortgage activity should be similarly strong in 2005 as rates remain low, yield-maintenance clauses expire and loans get refinanced, and the strengthening economy improves underlying commercial property economics.

· Just as in residential mortgage markets, there are differences in local economic effects on real estate finance activity, the same principle applies to regional and local commercial property markets.

Mortgage Rates Decline to 5.66% This Week

Rates on 30-year fixed-rate mortgages averaged 5.66% for the week ended Thursday, down from 5.67% a week earlier, mortgage company Freddie Mac said.

Rates on 15-year fixed-rate mortgages, a popular option for refinancing, slipped to 5.14% from 5.15% last week. Rates on one-year adjustable-rate mortgages were 4.18%, up from 4.11% last week. Five-year hybrid adjustable-rate mortgages averaged 5.02%, down from 5.05%.

The nationwide averages for mortgage rates do not include add-on fees known as points. The 30-, 15- and five-year mortgages each carried a 0.6-point fee. The one-year ARM carried a fee of 0.8 point.

Mortgage Rates Decline to 5.66% This Week

Rates on 30-year fixed-rate mortgages averaged 5.66% for the week ended Thursday, down from 5.67% a week earlier, mortgage company Freddie Mac said.

Rates on 15-year fixed-rate mortgages, a popular option for refinancing, slipped to 5.14% from 5.15% last week. Rates on one-year adjustable-rate mortgages were 4.18%, up from 4.11% last week. Five-year hybrid adjustable-rate mortgages averaged 5.02%, down from 5.05%.

The nationwide averages for mortgage rates do not include add-on fees known as points. The 30-, 15- and five-year mortgages each carried a 0.6-point fee. The one-year ARM carried a fee of 0.8 point.

One late payment can doom you

By Bankrate.com

Mind those bills. All of them. A late payment on one account could cost you higher rates and fees on all your accounts -- from your credit cards to your auto insurance. More and more companies are peeking at credit reports regularly to justify raising interest rates or increasing credit limits.

Some of the biggest credit-card companies have started aggressively penalizing customers who show signs of trouble anywhere in their credit reports. If a company likes what it sees in a customer's credit report, a cardholder might be rewarded with a thicker credit line. But one black mark from any creditor could trigger a rate hike.

So if you fall behind on your Sears bill, the interest rate on your Citibank credit card could shoot up.

A justification for hiking rates
"Why should that matter?" asks Howard Strong, author of "What Every Credit Card User Needs to Know." "It doesn't harm them in any way. It's ridiculous. It's just a way to knock up rates."

The lenders say their concerns are justified.

"We're looking at risk factors. If we see someone become delinquent with another creditor, that may be an indicator that they are about to become delinquent with us," says Maria Mendler, a spokeswoman for Citibank. "We may need to adjust our credit decisions accordingly."

Credit counselors say many people feel blindsided by the credit-card companies' rate increases -- especially if they haven't been late with any payments.

"I'm hearing about it more and more," says Hal Prather, a branch manager at Consumer Credit Counseling Service in Norcross, Ga. "It's apparent to me that most people don't read the inserts (that come with their statements). I think most people learn about it the hard way."

Mike Kidwell, vice president of the nonprofit debt crisis center Myvesta, adds, "We get calls and e-mails all the time. 'I've never been late on this card. Why is my rate going up?' Or 'I had trouble with one account and my rates went up on another card.'

"You've got to be aware of limits on credit cards. If other creditors are seeing balances going up and all of a sudden you're late, you're considered a greater risk. Not just with the one creditor that you paid late, but with all your creditors."

The credit/auto connection
Does having bad credit make you a bad driver? Some auto insurers think so. That's why they're using credit data to help determine your insurance rates.

Ninety-two of the 100 largest personal auto insurance companies in the country use credit data in underwriting new business, according to a study by Conning & Co., an insurance research and asset management firm.

It's not as wacky as it sounds. There does appear to be a connection between your credit record and the likelihood of you filing an auto insurance claim.

Drivers at the bottom of the credit heap file 40% more claims than drivers at the top of the credit heap, according to a study by the Insurance Information Institute.

Consequently, having black marks on your credit report could really bump up your auto insurance rates.

"A consumer with bad credit is going to pay 20% to 50% more in auto insurance premiums than a person who has good credit," says Clarence Smith, assistant vice-president at Conning & Co.

Who's watching
Some credit-card companies review customers' credit reports more often than others.

"Some may do it monthly. Some may do it quarterly. Some may do it yearly," says Martie Edmunds Zakas, corporate vice president of communications for Equifax, one of the three major credit bureaus. "Some never do it."

All Capital One card customers are subject to periodic credit checks.

"Of course, we may look at rule-breakers more frequently," said Diana Don, a spokeswoman for Capital One. "If people are constantly late or going over the limit, we don't want to give them that much leverage to overextend themselves."

Most auto insurance companies use credit data when underwriting new customers. Far fewer, just 14% of the nation's largest insurers, use credit data on contract renewals. And some states don't allow this practice at all.

Just how big an effect your credit record has on your auto insurance bill varies -- based on the state you live in and the insurance company you choose.

"Good credit at one company may not be a good insurance score at another company," Smith says. "That's why it's important to shop."

A study by the Casualty Actuarial Society showed that people with prior driving violations or accidents and good credit had much better loss ratios than people with clean driving records and a bad credit history. An auto insurer prices policies based on a customer's potential to file a future claim. Someone with a flawed driving record and clean credit record could actually end up paying less for auto insurance than someone with a spotless driving record and a spotty credit record.

Insurance score secrets
Your auto insurance company doesn't actually peek at your credit report. Instead, it receives an insurance score from a credit bureau based on the information in your credit record.

Fair, Isaac and Co. provides the credit bureaus with the formulas to crunch insurance scores. Some insurance companies have their own scoring models. Like a credit score, an insurance score is based on information found in a consumer's credit file. But the formulas used to arrive at the two types of scores are quite different.

"An insurance score is going to be less concerned with your propensity to take on new credit and more interested in how long you've been managing credit," says Craig Watts, a spokesman for Fair, Isaac and Co. "Insurance scores focus on issues of stability."

Curious about your insurance score? Good luck finding out. Insurance companies aren't required to tell, and few do. "I don't know anybody who will show you an insurance score," says Gerri Detweiler, author of The Ultimate Credit Handbook. "It's still a bit of a mystery to consumers."

Even if you could find out your insurance score, it might not be all that helpful. Yes, it could give you a sense of how a single auto insurer rates your credit record, but that's it.

When it comes to insurance scores, there's no uniform standard. So another insurance company, using another scoring model, could assign you a different insurance score and offer you vastly different rates.

The key thing to realize is your credit record does affect the cost of your auto insurance.

If you're having credit problems, it's best to stick with your current auto insurer until your credit record improves. If you must shop for a new auto policy, ask the insurer if they use credit data in their decision-making process. Not all insurance companies do.

How to protect yourself
Here's how to manage your accounts to reduce your chances of a late payment:
Keep a list of all accounts, due dates, balances and credit limits.

If an account's due date falls at a time of the month when cash is tight, call the issuer and have the due date changed.

Get in the habit of paying bills as soon as they arrive.

Monitor all accounts carefully.

Check your credit report at least once a year and correct any errors.

Having Good Credit Can Reduce Your Auto Insurance Costs

Press Release
(PRWEB) January 25, 2005

You don’t have any tickets or accidents on your driving record. So it seems like you should qualify for the best rate on your auto insurance, right? Not necessarily. Many insurance companies use your credit history to develop an “insurance score” that can impact your rate.

“The basic concept is that insurance scores have been found to predict the likelihood that you’ll file a claim. It has been found that those who manage their finances responsibly are more likely to drive responsibly as well. It may not seem like the two are related, but the bottom line is that unless you live in one of the few states where it’s not permitted, most insurers will look at your credit report,” says company spokesperson Melissa Costa.

The extent to which each insurance company uses credit depends on the company. Some use it for pricing, some for acceptance or denial, and some not at all. The best thing you can do is educate yourself. Know the insurance laws in your state, get a recent copy of your credit history, and shop your insurance to make sure you get the best rate. If you have great credit, there are insurance companies that will reward you for it. And if you don’t, there are companies that don’t use it to determine the rate. The only way you’ll know if you’re getting the best price is to compare quotes from as many insurance companies as possible.

Home equity loan can help with new business

Q: I am a 59-year-old woman with no consumer debt and with a house worth $425,000 that is paid off. I plan to start a new career/business in 2005 and will not have a regular day job. I expect 2005 to be a lean income year. I also need a new roof and have budgeted $15,000 from my savings.

My new financial planner has suggested I take out an interest-only home equity loan/line of credit. I will need at least $1,400 a month for the coming year. If I don't take out the loan, I will dip into my $46,000 savings or sell various stocks to help the cash flow. (I would not want to dip into my IRA money yet.)

I think this is good advice, but I am still a little nervous about monthly debt, even if it is only $100 a month. I do plan to sell my current home in 2006 or 2007, so I could easily pay off my loan.

What do you think?

_ Name withheld by request


A: I think your financial planner is right on track. I hate home equity loans when the proceeds are spent on consumer purchases, such as cars or vacations, but using money to start your own business may make for a great investment. In fact, investing in your own business may provide a much higher return than any other investments you own.

To keep costs low and provide greater flexibility, you might look at a home equity line of credit rather than a home equity loan. With a line of credit, you borrow money only when you need it, whereas a home equity loan will distribute a sum of cash at the get-go.

To keep your retirement intact, determine in advance how much money you are willing to spend before your business is profitable. I've seen too many people who kept plowing money into unprofitable businesses, which caused them to go broke right before retirement. If your business isn't profitable by the time you run through your budgeted cash, it may be wise to throw in the towel while your finances are still in good shape.


Q: I have three IRAs with my wife as beneficiary. Now that we are both at retirement age, would it be possible to list her as co-owner with me so she would not have to go through the system in case of my death? If not, what is the best way to handle it so she would have quick access to the money after my death?

_ Pete


A: You can't have your wife listed as a co-owner of your IRAs unless you withdraw your entire account balances and put the proceeds in a joint account. Cashing in your IRAs would result in a killer tax bill, which would negate any benefits achieved by the joint account.

Retirement accounts, such as 401(k)s, 457s, Keoghs, cash balance plans, defined benefit pension plans, etc., must be owned by an individual. Joint ownership of retirement plans is not permitted.

Fortunately, there is a simple way for you to ensure your spouse receives all of your retirement accounts at your death: List your wife as the primary beneficiary on your accounts. If you die before she does, she can convert your IRAs into her own IRAs without any taxes or hassles. All she would need to do is present a death certificate to the custodian, and the plan would be changed to her name within a couple of days.


Q: If a person had $10,000 they wanted to put somewhere and gain some money but also be able to access it in an emergency or just down the road, what would be the best option? I tried the bank route, and my banker suggested annuities. I wasn't sure the advice was in my interest or the bank's, however. I considered stocks, but I don't know anything about them.

_ G.W.


A: With investments, you can't have your cake and eat it, too. Most people want an investment that has a high return in a short period of time with no risk. Obviously, those types of investments don't exist.

If you want an investment that you can tap into in the near future, an annuity is a terrible option. Fixed annuities offer stable accounts, but they cannot be accessed without triggering a tax bill. Furthermore, most annuities carry hefty surrender penalties if they are cashed in within the first five to seven years.

If your goal is to have some cash reserves that you can get at if an emergency arises, you should probably just stick with a bank money market account. You won't earn much money, but you'll have the assurance that the money will be there if and when you need it. Only when you have enough emergency reserves set aside should you look at other investment options, such as annuities or stocks.

Home equity loan can help with new business

Q: I am a 59-year-old woman with no consumer debt and with a house worth $425,000 that is paid off. I plan to start a new career/business in 2005 and will not have a regular day job. I expect 2005 to be a lean income year. I also need a new roof and have budgeted $15,000 from my savings.

My new financial planner has suggested I take out an interest-only home equity loan/line of credit. I will need at least $1,400 a month for the coming year. If I don't take out the loan, I will dip into my $46,000 savings or sell various stocks to help the cash flow. (I would not want to dip into my IRA money yet.)

I think this is good advice, but I am still a little nervous about monthly debt, even if it is only $100 a month. I do plan to sell my current home in 2006 or 2007, so I could easily pay off my loan.

What do you think?

_ Name withheld by request


A: I think your financial planner is right on track. I hate home equity loans when the proceeds are spent on consumer purchases, such as cars or vacations, but using money to start your own business may make for a great investment. In fact, investing in your own business may provide a much higher return than any other investments you own.

To keep costs low and provide greater flexibility, you might look at a home equity line of credit rather than a home equity loan. With a line of credit, you borrow money only when you need it, whereas a home equity loan will distribute a sum of cash at the get-go.

To keep your retirement intact, determine in advance how much money you are willing to spend before your business is profitable. I've seen too many people who kept plowing money into unprofitable businesses, which caused them to go broke right before retirement. If your business isn't profitable by the time you run through your budgeted cash, it may be wise to throw in the towel while your finances are still in good shape.


Q: I have three IRAs with my wife as beneficiary. Now that we are both at retirement age, would it be possible to list her as co-owner with me so she would not have to go through the system in case of my death? If not, what is the best way to handle it so she would have quick access to the money after my death?

_ Pete


A: You can't have your wife listed as a co-owner of your IRAs unless you withdraw your entire account balances and put the proceeds in a joint account. Cashing in your IRAs would result in a killer tax bill, which would negate any benefits achieved by the joint account.

Retirement accounts, such as 401(k)s, 457s, Keoghs, cash balance plans, defined benefit pension plans, etc., must be owned by an individual. Joint ownership of retirement plans is not permitted.

Fortunately, there is a simple way for you to ensure your spouse receives all of your retirement accounts at your death: List your wife as the primary beneficiary on your accounts. If you die before she does, she can convert your IRAs into her own IRAs without any taxes or hassles. All she would need to do is present a death certificate to the custodian, and the plan would be changed to her name within a couple of days.


Q: If a person had $10,000 they wanted to put somewhere and gain some money but also be able to access it in an emergency or just down the road, what would be the best option? I tried the bank route, and my banker suggested annuities. I wasn't sure the advice was in my interest or the bank's, however. I considered stocks, but I don't know anything about them.

_ G.W.


A: With investments, you can't have your cake and eat it, too. Most people want an investment that has a high return in a short period of time with no risk. Obviously, those types of investments don't exist.

If you want an investment that you can tap into in the near future, an annuity is a terrible option. Fixed annuities offer stable accounts, but they cannot be accessed without triggering a tax bill. Furthermore, most annuities carry hefty surrender penalties if they are cashed in within the first five to seven years.

If your goal is to have some cash reserves that you can get at if an emergency arises, you should probably just stick with a bank money market account. You won't earn much money, but you'll have the assurance that the money will be there if and when you need it. Only when you have enough emergency reserves set aside should you look at other investment options, such as annuities or stocks.

Home equity loan can help with new business

Q: I am a 59-year-old woman with no consumer debt and with a house worth $425,000 that is paid off. I plan to start a new career/business in 2005 and will not have a regular day job. I expect 2005 to be a lean income year. I also need a new roof and have budgeted $15,000 from my savings.

My new financial planner has suggested I take out an interest-only home equity loan/line of credit. I will need at least $1,400 a month for the coming year. If I don't take out the loan, I will dip into my $46,000 savings or sell various stocks to help the cash flow. (I would not want to dip into my IRA money yet.)

I think this is good advice, but I am still a little nervous about monthly debt, even if it is only $100 a month. I do plan to sell my current home in 2006 or 2007, so I could easily pay off my loan.

What do you think?

_ Name withheld by request


A: I think your financial planner is right on track. I hate home equity loans when the proceeds are spent on consumer purchases, such as cars or vacations, but using money to start your own business may make for a great investment. In fact, investing in your own business may provide a much higher return than any other investments you own.

To keep costs low and provide greater flexibility, you might look at a home equity line of credit rather than a home equity loan. With a line of credit, you borrow money only when you need it, whereas a home equity loan will distribute a sum of cash at the get-go.

To keep your retirement intact, determine in advance how much money you are willing to spend before your business is profitable. I've seen too many people who kept plowing money into unprofitable businesses, which caused them to go broke right before retirement. If your business isn't profitable by the time you run through your budgeted cash, it may be wise to throw in the towel while your finances are still in good shape.


Q: I have three IRAs with my wife as beneficiary. Now that we are both at retirement age, would it be possible to list her as co-owner with me so she would not have to go through the system in case of my death? If not, what is the best way to handle it so she would have quick access to the money after my death?

_ Pete


A: You can't have your wife listed as a co-owner of your IRAs unless you withdraw your entire account balances and put the proceeds in a joint account. Cashing in your IRAs would result in a killer tax bill, which would negate any benefits achieved by the joint account.

Retirement accounts, such as 401(k)s, 457s, Keoghs, cash balance plans, defined benefit pension plans, etc., must be owned by an individual. Joint ownership of retirement plans is not permitted.

Fortunately, there is a simple way for you to ensure your spouse receives all of your retirement accounts at your death: List your wife as the primary beneficiary on your accounts. If you die before she does, she can convert your IRAs into her own IRAs without any taxes or hassles. All she would need to do is present a death certificate to the custodian, and the plan would be changed to her name within a couple of days.


Q: If a person had $10,000 they wanted to put somewhere and gain some money but also be able to access it in an emergency or just down the road, what would be the best option? I tried the bank route, and my banker suggested annuities. I wasn't sure the advice was in my interest or the bank's, however. I considered stocks, but I don't know anything about them.

_ G.W.


A: With investments, you can't have your cake and eat it, too. Most people want an investment that has a high return in a short period of time with no risk. Obviously, those types of investments don't exist.

If you want an investment that you can tap into in the near future, an annuity is a terrible option. Fixed annuities offer stable accounts, but they cannot be accessed without triggering a tax bill. Furthermore, most annuities carry hefty surrender penalties if they are cashed in within the first five to seven years.

If your goal is to have some cash reserves that you can get at if an emergency arises, you should probably just stick with a bank money market account. You won't earn much money, but you'll have the assurance that the money will be there if and when you need it. Only when you have enough emergency reserves set aside should you look at other investment options, such as annuities or stocks.

It's Risky, But An ARM Can Get You A Bigger House - Inside Mortgages

Most people turn to adjustable-rate mortgages (ARMs) because they carry lower interest rates, and that translates into lower monthly payments. Lower interest rates also may allow you to qualify for a bigger home loan, which means you can afford a bigger house. How much bigger? Quite a bit.
First, let's look at how ARMs are structured, and at what happens when it's time to bring the word “adjustable” into play. With an ARM, the lender agrees to a lower interest rate for the first year or more of the life of the loan. Technically speaking, an ARM can be negotiated for any length of time, but the most common ones are one-, three-, and five-year loans. The shorter the time before the loan adjusts, the lower the initial interest rate. In today's market, if you could qualify for a 30-year rate of 5.5 percent, you could probably also qualify for a one-year ARM for 3.5 percent, or a three-year ARM at 4.375 percent, or 4.625 percent for a five-year loan. Once the introductory period is over, the loan goes either up or down to match the current rate, and it can adjust every year after that.

Since no one really knows what the interest rates will be next month, let alone in one, three, or five years, risk is a factor. If you are shopping for an ARM, make sure it has annual caps limiting the amount the interest can be increased at any one time -- 2.0 percentage points is common -- and a ceiling that limits how high it can go, which is often a total increase of 6.0 percentage points.

The interest rate on a 30-year loan is always going to be higher than it would be for the first five years of an ARM. How much more depends upon the 30-year rate. With the 30-year rate at 5.5 percent, you could get an ARM at 4.625 percent. Were the 30-year rate to climb to 6.0 percent, you might be able to get a five-year ARM for 5.0 percent or 4.875 percent. The higher the 30-year rate, the bigger the spread.

When interest rates are low, as they are now, there is less room for maneuvering. The savings can be measured in the thousands of dollars, in some cases in the tens of thousands, depending on the size of the loan. The point to remember is that when you qualify for a loan and a lender determines how big a payment you can afford to make, the “payment” includes both interest and principal -- but it does not include taxes and insurance.

ARMs also are structured differently than conventional loans. Let's say you have a five-year ARM on a $100,000 loan at 4.625 percent. The payments would be based on its being a conventional, 30-year loan at 4.625 percent. You would make a basic monthly payment of $514.14. At the end of those five years you would still owe $91,329.28 in principal and it is likely the loan would be adjusted.

Now let's say that the interest rate had shot up and you were now paying 6.0 percent. The loan would be recalculated so you could pay off that balance over 25 years at the new rate. This would make your basic monthly payment $588.44 -- an increase of $74.30 a month, or $991.60 a year. If you were to end up paying 8.0 percent the next year, the new, basic monthly payment would be $704.89 -- a $190.75-a-month increase.

Yet even though ARMS are risky, there are a number of reasons to choose them. Many people like ARMs because they know they will be moving before they have to face an adjustment. Others opt for ARMs because they have built-in guarantees limiting how high the interest rate can go, coupled with faith that interest rates will not climb too high. Some people use ARMs because they are the only way they can afford to buy a house -- and they hope for the best. And some people want ARMs because they can get a bigger house.

A $100,000 conventional, 30-year loan at 5.5 percent requires a basic monthly mortgage payment of $567.79. So, if you were approved for a mortgage payment of no more than $567.79 a month, $100,000 is the maximum size loan you could get at 5.5 percent. But if you got a five-year adjustable-rate mortgage at 4.625 percent, the monthly payment would be only $514.14, or enough to cover a loan of $110,435. Therefore, you could move into a home that cost $10,000 more. Of course, at the end of the five years you would still owe $100,859.52. And if the interest rate were to jump to 5.5 percent, your basic monthly payment would rise to $619.37.

People who choose this type of loan think about the amount of paid equity they will have in the home at the end of five years. With the 4.625 percent ARM, it would be $9,575.48. This does not count any added equity from increasing property values. If they had taken the 30-year $100,000 loan at 5.5 percent, the monthly payment would have given them $7,539.47 in equity or $2,036.01 less. That lower equity would also be in a home that cost $10,000 less to buy.

Finally, even though the word "adjustable" applies to the mortgage rate when you get an ARM, you can also apply it to your home-buying plans and strategy. Ask yourself: Do you want the lowest payment you can get? Or do you want to get the most house you can get? It's a choice that only you can make, and it is definitely something to think about when you go shopping for both your next mortgage and your next home.

Fannie Mae to Withhold Executives' Bonuses

WASHINGTON - Mortgage giant Fannie Mae is eliminating 2004 performance bonuses for 43 top executives, a move that will save the company millions of dollars, as it struggles to deal with major financial reporting problems.

The nation's biggest backer of home mortgages disclosed the move late Friday in a filing with the Securities and Exchange Commission. It said its board of directors had voted this week to eliminate cash bonuses that would have been paid to top executives for hitting last year's performance goals.

The company also said it was postponing the payment of company stock for superior performance to top executives "until the company has reliable financial data for prior fiscal years."

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In addition, it said, Leanne G. Spencer, Fannie Mae's top accounting officer, has "stepped down" from that position but remains in a lesser post.

The Fannie Mae board last month forced out the company's two top officials, chief executive Franklin Raines, and chief financial officer Timothy Howard following revelations that the company will have to restate some $9 billion of earnings, or about one-third of its profits, going back to 2001.

To begin making up that shortfall and increase the company's capital reserves, Fannie Mae announced Tuesday it was cutting its first-quarter dividend payment this year by half, to 26 cents per share.

It was the first dividend cut for Fannie Mae in more than two decades and is expected to save the company about $250 million a quarter.

Regulators in the Office of Federal Housing Enterprise Oversight ordered the company in September to boost its capital cushion, the amount of reserves it has to guard against financial losses, by some $5 billion by the middle of 2005.

Stefanie Mullin, a spokeswoman for the oversight office, said it had been informed of the board's action regarding bonuses and "we consider the action reasonable and appropriate."

Fannie Mae also confirmed Friday that its board voted to withdraw from a deal to develop a new office complex that had been expected to cost $500 million to $700 million and spur development in a rundown section of Washington.

In its new SEC filing Friday, Fannie Mae did not disclose the total amount in cash bonuses that were being eliminated, and Smith refused to give a figure other than to indicate it would be in the millions of dollars and would affect the company's 43 top executives.

In 2003, the top five officers at Fannie Mae alone received $8.2 million in cash bonuses.

The action by the board will mean that Raines and Howard will be denied cash bonuses they would have received for 2004. The board had come under heavy criticism for allowing both men to leave the company with lucrative severance packages.

Last month, Rep. Richard Baker, R-La., head of a House Financial Services subcommittee with jurisdiction over Fannie Mae, called on the oversight agency to "take action to recapture all bonus payments from executives that were awarded based upon the faulty and deeply flawed earnings statements of the enterprise."

Agency Director Armando Falcon told Baker last week that his agency planned to recover excessive bonus payments as part of its heightened scrutiny of Fannie Mae operations.

In addition to the continuing investigation of its accounting practices, Fannie Mae faces a civil investigation by the SEC, a criminal probe by the Justice Department and shareholder lawsuits.

Fannie Mae and its smaller rival, Freddie Mac, buy mortgages from banks and other lenders and sell some of them to investors in the form of mortgage-backed securities.

Freddie Mac is still sorting through its own accounting problems after it disclosed in June 2003 that it had misstated earnings by $5 billion.

The two government sponsored enterprises were created by Congress to provide more capital to the nation's housing markets.

Mortgage rates fall again as fears about inflation subside

January 23, 2005

BY MARTIN CRUTSINGER
ASSOCIATED PRESS

Rates on 30-year mortgages fell for a third straight week as investors' concerns about inflation were eased by reports showing that prices fell in December.


The weekly survey, released Thursday by the mortgage company Freddie Mac, showed that rates on 30-year, fixed-rate mortgages averaged 5.67 percent for the week ending Jan. 20, compared with 5.74 percent the previous week.


Low mortgage rates have powered the housing industry in recent years. Sales are expected to set records for both new homes and existing homes when all the results for 2004 are in.


Analysts are forecasting that housing will enjoy another good year in 2005 if mortgage rates do not rise too sharply, given the Federal Reserve's credit-tightening campaign to ensure that inflation stays in check.


Economists said worries about inflation were eased with Wednesday's report showing that consumer prices dipped 0.1 percent in December, reflecting the biggest drop in energy costs since July.


"Financial markets see inflation as being well managed by the Fed, and that allows long-term interest rates to remain low, with mortgage rates even falling a little more this week," said Frank Nothaft, Freddie Mac's chief economist.


Rates on 15-year, fixed-rate mortgages, a popular option for mortgage refinancing, declined last week to 5.15 percent, from 5.19 percent the previous week. Rates on one-year adjustable-rate mortgages were 4.11 percent, little changed from the previous week's 4.10 percent.


Five-year hybrid adjustable rate mortgages averaged 5.05 percent, also unchanged from the previous week. These mortgages have a fixed rate for five years, and then they adjust each year after that.


The nationwide averages for mortgage rates do not include add-on fees known as points. The 30-year and 15-year mortgages each carried a 0.7-point fee. The five-year and one-year ARMs both carried fees of 0.6 point.


A year ago, rates on 30-year mortgages averaged 5.64 percent.

Low mortgage rates boost 2004 home sales

Spurred by continued low mortgage interest rates, last year's Louisville-area home sales rose more than 9 percent from 2003.

And some industry experts think 2005 sales will at least match last year's, but rising interest rates may temper growth.

For last year, the Greater Louisville Association of Realtors recorded 14,036 Realtor-assisted sales of new and existing homes, up from 12,830 in 2003, while median sales prices rose less than 1 percent to $132,500.

The sales increase lagged a 15 percent gain between 2002 and 2003, but still, "we had a strong market in Louisville" last year, said Kathy McGann, president of the Realtors association and vice president of education and compliance for Semonin Realtors.

Nationally, year-end sales data are due out this week, but through November, existing-home sales were up 6.1 percent compared with the first 11 months of 2003, according to the National Association of Realtors in Washington.

A. Howard Young, president of the Mortgage Bankers Association of Louisville and a loan officer for GMAC Mortgage, said the local market last year was a bit tricky.

"The second and third quarters were booming, but the fourth quarter slowed down a whole lot," he said.

Home sales typically slow toward year's end, he said, but last year's activity was slower than normal. Fourth-quarter sales rose only 2.8 percent over the prior year, compared with increases of 12.9 percent in the first quarter, 19.4 percent in the second and 4.1 percent in the third.

Young attributed the fourth-quarter lull to homebuyers taking a wait-and-see attitude as to who would win the presidential election. October sales were down 4.4 percent from the prior year.

"This election had a huge impact on real-estate sales," said Charles Ballard, a Realtor and chief operating officer with Century 21 Realty Group-Hagan. "People really got wrapped up into the election and into the debates, and that had a negative impact on real estate. Other than that, things got back to normal before the end of the year."

Programs that helped first-time homebuyers also boosted the market, McGann said.

About 40 percent of buyers are first-time homebuyers, she said, "so anytime you have low interest rates and products that help them get in a home, that's where that growth is coming from, not just locally, but also across the country."


One trend that stood out last year, Ballard said, was increased sales activity for rural land, triggered in part by farmers getting out of the tobacco business and selling their acreage to developers.

In rural Bardstown, for example, "our auction market was its best ever," Ballard said, adding that the sales activity has been pushing up property values in the city as well. "Bardstown is a hot market, Bardstown and all of Nelson County."

Mortgage rates, though, were the big story last year.

Ballard said mortgage rates pretty much hovered around 6 percent throughout the year, and "the market will grow at 6 percent."

This week, 30-year, fixed-rate mortgages averaged 5.67 percent, up slightly from 5.64 percent a year ago, according to the mortgage company Freddie Mac.

Young said homebuyers also were enticed by more mortgage programs and products, including interest-only payments, which helped consumers buy bigger homes.

Meanwhile, the median sales price of about $132,000 means Louisville housing remains affordable, McGann said.

Nationally, the median sales price was $183,100, she said, so Louisville's median means "you can get into homes a lot easier in Louisville than you can compared with the nation as a whole."

And while some markets have seen soaring price appreciation, Louisville's growth, historically, has been steady at 4 percent to 6 percent for the past 14 years, McGann said.

That's a little higher, though, than the latest increase in household income, according to the U.S. Department of Housing and Urban Development, which said that for fiscal 2004, median family income in the Louisville metro area rose 3.5 percent from a year earlier.

Outlook for 2005

This year, McGann said, "we will continue to have strong growth, probably in the single-digit growth mode, because we're going to be dealing with an upward trend in interest rates."

One bright spot she sees is the potential growth in people buying condominiums in downtown Louisville.

Young also said Louisville is positioned for another strong year, maybe even better than last year, partly because of the increase in new condominiums and condominium conversions, coupled with attractive mortgage options.

"It seems like there's a boom in housing and financing as well," he said. "The market is really strong."

Young thinks 2005 will be a good year for increased homeownership among minorities such as African Americans and Asians, but especially Hispanics.

"The Hispanic market is untapped; it's a lucrative market," he said.

Ballard thinks this year could be close to 2004, but probably not enough to set a record.

Among trends he foresees are an increase in the number of homeowners fixing up their homes and staying put because of the increase in the cost of land, and that some people might shy away from buying bigger homes because of increasing utility rates.

As for mortgage rates, Young doesn't expect much fluctuation in the Louisville market and thinks the 30-year fixed-rate mortgage could end the year between 5.75 percent and 6 percent. McGann envisions rates at 6.5 percent by year's end, while Ballard expects a slow, steady rise to 6.5 percent to 7 percent.

Overnight Mortgage Rates dip further

Long-term mortgage interest rates were lower Thursday, and the benchmark 10-year Treasury bond yield sank to 4.16 percent.

The 30-year fixed-rate average dropped to 5.22 percent, and the 15-year fixed-rate slipped to 4.73 percent. The 1-year adjustable was down slightly at 3.69 percent.

The 30-year Treasury bond yield fell to 4.66 percent.

Rates are current as of 7:15 p.m. Eastern Standard Time.

Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.

In other economic news, the Dow Jones Industrial Average was down 68.5 points, or 0.65 percent, finishing at 10,471.47. The Nasdaq was down 27.72 points, or 1.34 percent, closing at 2,045.88.

Mortgage rates fall for third week

By Holden Lewis • Bankrate.com

The rates on long-term mortgages have fallen for the third week in a row, even as the one-year adjustable was unchanged.

The benchmark 30-year fixed-rate mortgage fell 5 basis points to 5.71 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.32 discount and origination points. One year ago, the mortgage index was 5.67 percent.

The benchmark 15-year fixed-rate mortgage fell 4 basis points to 5.17 percent. The benchmark one-year adjustable-rate mortgage remained 4.44 percent.

Economists expect rates across the board to climb. They're not sure why long-term rates have been going down instead of up.

"It's surprising that with oil back at $50 a barrel, the weak dollar and growth above trend, mortgage rates are around 5 3/4 percent," says David Berson, chief economist for the National Association of Home Builders. He offers two theories: Either financial markets are predicting much slower economic growth than the economists are predicting, or financial markets believe the Federal Reserve will continue to keep inflation well under control.

Since late June, the Fed has raised short-term rates five times by a quarter-point each time. The prime rate has gone from 4 percent to 5.25 percent. Yet rates on one-year adjustable-rate mortgages fell until autumn, when they began marching upward gradually. Long-term rates haven't seen such a turnaround. Yet. Economists are confident that long-term rates will rise this year.

Mortgage bankers think they'll go up, too. "I like people who are locking in," says Bob Moulton, president of Americana Mortgage, a brokerage in New York. He adds jovially (not in a tone of doom): "I'm just waiting for the house of cards to fall."

In other words, he believes it's just a matter of time before long-term rates rise. "I don't think a borrower has much to lose by locking at application," he says.

Moulton was in the business when rates took a big jump at the beginning of 1994. The average rate on a 30-year mortgage was around 7 percent in January and the first half of February of that year. Then rates took off, hitting 8.29 percent in early April and 8.65 percent in mid-May.

"People were caught off-guard," Moulton says. "Now, being older and wiser, I try to lock them in at application because rates can spike up."

In a lot of markets, the fate of 15- and 30-year fixed mortgages doesn't matter a whole lot because so many borrowers take out adjustable-rate mortgages, or ARMs. That's the case in Moulton's territory. Traditional one-year ARMs are almost extinct, he says, and many borrowers are choosing hybrids such as the 5/1 ARM. That loan has an initial rate that lasts five years, and the rate adjusts annually thereafter.

Quite a few of Moulton's customers got 3/1 ARMs three years ago, thinking they would move relatively soon. Now their rates are about to enter their adjustment periods, and these borrowers are refinancing into new 3/1 or 5/1 ARMs.

Those people are choosing ARMs over 30-year fixed-rate mortgages because they believe that they'll move within five years or so, and they can save a lot of money in the meantime. Moulton says he can offer a 5/1 ARM about 1 percentage point lower than for a comparable 30-year fixed.

The difference is narrower in Freddie Mac's weekly mortgage rate survey, where the 5/1 ARM generally is about three-quarters of a percentage point lower than the average 30-year rate. In February, Bankrate.com will replace one-year ARMs with 5/1 ARMs in its weekly national survey of mortgage rates.

Mortgage rates fall tuesday

Tue Jan 18, 2005 05:16 PM ET
NEW YORK, Jan 18 (Reuters) - The average rate on a 30-year U.S. mortgage with no upfront points fell 1/8 of a percentage point on Tuesday to 5-3/4 percent, according to BestInfo Inc.
The 30-year mortgage rate with one upfront point fell 1/8 of a percentage point to 5-1/2 percent.

The 30-year mortgage rate with two upfront points fell 1/8 pf a percentage point to 5-1/4 percent.

The Mortgage Point Monitor is provided exclusively to Reuters by BestInfo. The company, formerly BestRates Inc., is a Dover, Vermont-based provider of mortgage market analysis.

New Medicare Benefits

BOISE -- Idaho seniors are eligible for a new round of benefits including physicals, according to a news release from Medicare Today, a nonprofit public advocacy group.

"These new screenings will help seniors get control of their health status and will improve their quality of life by focusing on prevention as well as treatment," said Larry Krutchik, regional director of Medicare Today.

The Medicare Modernization Act passed by Congress in 2003 offers seniors:

* Cardiovascular screenings: Medicare will now cover blood tests that measure cholesterol, lipids and triglyceride levels. Physicians use the tests to assess risk for heart attack, stroke and other cardiovascular illnesses.

* Diabetes screenings: Seniors with diabetes are at greater risk for health complications, including blindness, kidney disease and cardiovascular illnesses, the news release said. Early detection is critical in preventing serious illness.

* Welcome to Medicare physical: Medicare will pay for new enrollees to have a complete physical examination. This will give doctors the opportunity to detect any potentially serious health problems.

Senior Health Insurance Benefits Advisors -- SHIBA -- provides a free service to seniors to help them understand Medicare supplements, long-term care, managed care, how Medicare works with other health plans, medical claims assistance and other related issues. In Twin Falls, call advisers Tamara Stricker or Renee Chariton at 736-4713, and in Mini-Cassia, call adviser George Schwindeman at 436-9107 or 436-6679.

For more information on Medicare benefits, call toll-free at 1-800-MEDICARE (1-800-633-4227). TTY users should call 1-877-486-2048. Information can also be seen on the Medicare Web site at www.medicare.gov.

For more information on the Medicare Today organization, call 818-728-3352.

30 year mortgage rates decline for 2nd week

By Martin Crutsinger

The Associated Press


WASHINGTON - Rates on 30-year mortgages fell for a second straight week, helping to get the housing industry off to a good start in the new year.

Freddie Mac's weekly survey of mortgage rates released Thursday showed that rates on 30-year, fixed-rate mortgages averaged 5.74 percent for the week ending Jan. 13, down from 5.77 percent last week.

Low mortgage rates have powered home sales. Analysts think sales hit a record high for all of 2004 and the housing market is expected to post another good year in 2005.

Amy Crews Cutts, the mortgage company's deputy chief economist, noted that 30-year mortgage rates averaged 5.84 percent for all of last year, a significant improvement over an average of 9.5 percent for the past 30 years.

She said rates are likely to end the year above 6 percent, reflecting in part the credit tightening campaign of the Federal Reserve.

Some analysts think rates on 30-year mortgages could climb to around 6.5 percent by the end of this year, which would still be considered low by historical standards.

Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, dipped this week to 5.19 percent, down from 5.21 percent last week. For one-year adjustable-rate mortgages, rates remained unchanged at 4.10 percent.

GMAC considers new mortgage unit

NEW YORK, Jan 13 (Reuters) -

The finance arm of General Motors Corp. (GM.N: Quote, Profile, Research) on Thursday said it was considering setting up a separate subsidiary for its residential mortgage lending business, in a move analysts said was meant to protect the mortgage operations in case GM's debt ratings are cut to junk.

The move may also enable GM to sell off the unit in the future, analysts said.

Bond investors believed setting up a mortgage subsidiary signals that GM sees a downgrade as a real possibility, which forced GM bond prices lower relative to Treasuries in heavy trading. GM shares fell, as automakers' shares generally declined.

GM officials did not return phone calls seeking comment.

Rating agency Moody's Investors Service affirmed the ratings of General Motors' finance arm, General Motors Acceptance Corp., at a level three steps above junk, noting that this move is not expected to be to the disadvantage of current bondholders.

GM and its financing arm are rated one step above junk status by Standard & Poor's. Given the headwinds the company faces this year, including rising interest rates and high auto inventories, getting cut to junk status is possible, analysts said.

GMAC said that it is considering placing its residential mortgage operations in a newly formed holding company to be named Residential Capital Corp.

That unit would seek its own credit ratings based on its debt and equity structure. Mortgage banking accounted for about half of GM's pretax earnings in the first nine months of 2004.

The move may be a prelude to selling the residential mortgage arm, perhaps in an initial public offering, said Nik Vasilakos, a bond analyst at Merganser Capital in Boston. GM has a history of selling off profitable units to generate cash, as it did with Electronic Data Systems Corp. (EDS.N: Quote, Profile, Research) in 1996.

But the move may also be designed to ensure GMAC's residential mortgage arm can still borrow money cost effectively if GMAC gets cut to junk, said Darin Feldman, a portfolio manager at Aladdin Capital in Stamford, Connecticut.

"Bond investors seem to take this as an admission that a downgrade is coming, but it's just a prudent measure to address a situation that is out of GMAC's hands. They can't control what the ratings agencies do," Feldman said.

GM bonds sold off relative to Treasuries on the news. Yield spreads, or the extra yield over Treasuries that investors demand for taking a company's credit risk, on GMAC's 6.75 percent notes due 2014 widened 0.04 percentage point to 2.79 percentage point. The bonds traded as much as 0.06 percentage points wider, according to MarketAxess.

The company's bonds widened about 0.01 percentage point more than Ford Motor Co's.

Meanwhile, shares of GM fell 64 cents, or 1.67 percent, to $37.75. Ford's shares fell 1.47 percent to $14.11.

30 Year Mortgage Rates Decline to 5.74%

Freddie Mac's weekly survey of mortgage rates showed that rates on 30-year fixed-rate mortgages averaged 5.74% for the week ended Jan. 13, down from 5.77% the previous week.

Rates on 15-year fixed-rate mortgages, a popular option for refinancing, slipped this week to 5.19% from 5.21% last week. For one-year adjustable-rate mortgages, rates remained unchanged at 4.1%.

The nationwide averages for mortgage rates do not include add-on fees known as points. The 30-year, 15-year and one-year adjustable mortgages each carried a 0.6-point fee. The five-year adjustable mortgage carried a 0.5-point fee.


For mortgage quotes please visit http://www.mortgagesort.com

Subprime Loans Are More Likely to Have Prepayment Penalties

Jan. 14--Homeowners in minority neighborhoods are 35 percent more likely to deal with prepayment penalties on subprime home loans than those in mostly white neighborhoods, according to a study released yesterday by a consumer-advocacy group in Durham.

A second study by the Center for Responsible Lending found that homeowners with subprime loans didn't receive "a meaningful interest-rate reduction" from paying a prepayment penalty to refinance their mortgage. The studies were conducted between January 2000 and July 2004.

Subprime loans are directed at individuals who do not qualify for lower interest rates through traditional banks or mortgage groups. About 20 percent of mortgage loans are subprime, the center said.

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A prepayment penalty is applied when a mortgage is paid off before the due date and can cost thousands of dollars depending on the amount of the loan. Some subprime lenders require prepayment penalties in exchange for a lower interest rate.

The studies found that the penalties act as a deterrent to families whose financial situation has improved enough that they can qualify for a prime mortgage loan, but they can't afford the prepayment fee. Nearly 80 percent of subprime mortgage loans included in the study contain prepayment penalties compared with 2 percent of prime mortgage loans.

Officials with the Durham center said that prepayment penalties are harmful to minority households because "two thirds of the net wealth held by African-Americans and Latinos consists of home equity."

"The evidence is now clear. Prepayment penalties in subprime loans are locking African-American families out of the prime mortgage market and rolling back hard-earned economic progress," said Hilary Shelton, the director of the Washington bureau of the NAACP.

The studies are the latest in a series of reports by the Center for Responsible Lending focused on subprime loans' role in cases of predatory-mortgage lending.

State officials and consumer advocates said that predatory loans strip homeowners of equity in their home through excessive fees and unnecessary refinancings, with some loans eventually being forced into foreclosure.

Consumer advocates say that low- to moderate-income residents, the elderly, the disabled, immigrants and people with poor credit ratings are vulnerable to predatory lending.

Since the N.C. Predatory Lending Act took effect July 1, 2000, it has saved state homeowners more than $100 million by limiting or prohibiting predatory terms for subprime mortgage loans, according to a report by the center. An U.S. House bill was introduced in March that would use North Carolina's predatory-lending law as the model for a federal standard.

Mitchell Feinstein, the chairman of the National Home Equity Mortgage Association, said that most subprime lenders adequately match the credit risk of potential borrowers. He said that some states' predatory-lending laws are too restrictive.

"We're talking about a $400-billion industry and the number of people who are duped by people with bad intentions is small," Feinstein said.



For competitive mortgage information visit http://www.mortgagesort.com

Rates on 30-Year Mortgages Fall Again

WASHINGTON - Rates on 30-year mortgages fell for a second straight week, helping to get the housing industry off to a good start in the new year.

Freddie Mac's weekly survey of mortgage rates released Thursday showed that rates on 30-year, fixed rate mortgages averaged 5.74 percent for the week ending Jan. 13, down from 5.77 percent last week.

Low mortgage rates have powered home sales. Analysts believe sales hit a record high for all of 2004 and the housing market is expected to post another good year in 2005.

Amy Crews Cutts, the mortgage company's deputy chief economist, noted that 30-year mortgage rates averaged 5.84 percent for all of last year, a significant improvement over an average of 9.5 percent for the past 30 years.

"The onset of 2005 bodes well for the housing industry," she said.

She said rates are likely to end the year above 6 percent, reflecting in part the credit tightening campaign of the Federal Reserve, which is raising rates to keep inflation in check.

Some analysts believe rates on 30-year mortgages could climb to around 6.5 percent by the end of this year, which would still be considered low by historical standards.

Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, dipped this week to 5.19 percent, down from 5.21 percent last week. For one-year adjustable-rate mortgages, rates remained unchanged at 4.10 percent.

Freddie Mac added another type of mortgage to its weekly survey: a five-year, "hybrid" adjustable- rate mortgage. It's fixed for five years and then adjusts each year thereafter. The rate on that mortgage averaged 5.05 percent this week, up slightly from 5.03 percent last week.

The nationwide averages for mortgage rates this week do not include add-on fees known as points. The thirty-year, 15-year and one-year adjustable mortgages each carried a 0.6 point fee. The five-year adjustable mortgage carried a 0.5 point fee.

A year ago, rates on 30-year mortgages averaged 5.66 percent with 15-year mortgages at 4.97 percent and one-year ARMs at 3.62 percent. There isn't a figure for five-year adjustable mortgages because Freddie Mac just began tracking those rates this year.



For fast and easy mortgage information visit http://www.mortgagesort.com

Home sales increase in 2004 - 2005-01-11 - The Business Journal (Minneapolis/St. Paul)

A record number of Twin Cities homes were sold in 2004, the four area Realtor associations announced Tuesday.

In 2004, 58,233 homes were sold, a 3 percent increase from 2003, according to a Realtor Association press release. The median home price in 2004 was $215,900, an 8 percent increase from the previous year.

There were 64,325 pending sales in 2004, up 6.4 percent compared to 2003; and there were 97,737 new listings in 2004, a 13 percent increase from the previous year.

The statistics include single-family detached, condiminiums, townhouses and twin homes, based on existing home sales reported by the Regional Multiple Listing Service of Minnesota Inc.

Home sales

Home run for home sales
Median county price for existing homes skyrockets to $174,815

Glen Creno and Catherine Reagor Burrough
The Arizona Republic
Jan. 12, 2005 12:00 AM

Voracious investors and move-up buyers pushed sales and prices of existing homes to record highs in Maricopa County in 2004.

Last year, 102,115 existing Valley homes changed hands, a 38 percent jump from 2003's record of 73,785, according to the Arizona Real Estate Center at Arizona State University. The median price of a used Valley home climbed almost 13 percent last year to reach an annual record of $174,815.

Investors betting on quick gains in value and buyers looking to cash out and move to bigger and better houses are driving sales. First-time buyers are finding it increasingly difficult finding a house they can afford, especially with inventory so tight.

Anita and Pierre Cavalcanti sold their $252,000 home in Litchfield Park in just two days. They are moving to Biloxi, Miss., to be near their daughter.

"We really like Phoenix and would like to move back at some point, but by then we probably won't be able to afford the home we sold," Anita said.

Your Mortgage and Your Credit Score - You Think You're Ready to Purchase a House; Things You Should Know Says CreditAndYou.com

Distribution Source : PRNewswire

Date : Tuesday - January 11, 2005



GLENSIDE, Pa., Jan. 11 /PRNewswire/ -- You've looked at neighborhoods, floor plans, and tracked the miles to work. You've collected the names of all of the real estate agents that your family and friends have used. You have even decided that you will need to paint the door fire engine red like the home in your favorite decorating magazine. You're ready, or are you? Have you considered the one piece of information that will affect the home you can afford, the neighborhood you can move to, the interest rate that you will pay and the monthly mortgage that you will write a check for the next fifteen or thirty years? What have you missed? Perhaps the most important piece of the puzzle. Your credit score! It will affect all of this and even your ability to buy a house at all.

"You must know your credit score," says CreditAndYou.com founder Dennis Cary. "By the time you finish purchasing your home everyone will know your credit score. You should know it first. You need to know the score and the items that lower it, if any. "





Things that negatively affect your score:

Credit Score Inquiries Report Errors Collections Charge Offs Late Payments Judgements Tax Liens Repossessions Foreclosure Bankruptcy Many New Accounts Not Enough of a Credit History Credit Cards That Are Near Maximum Limits Too Many Credit Report Inquiries Too Many Credit Cards New Debt (i.e. new car payments) Number of Lost Credit Cards Reported



"Now, before you do anything else towards buying your new home, stop, and order your credit report and score," says Cary. If you can figure out what color to paint your front door you can find a website that will provide you with all three credit reporting companies and your score.

Why be so concerned about your credit score?

Your loan officer will be concerned about your credit score. In fact everyone that will assist you in buying your home will be interested in your credit score. Your lender will look at your credit score as a way of determining how likely you are to be faithful to your home loan.

What should you do if you have a low credit score?

If you have a large amount of outstanding debt, start paying it off. Give up your latte a day and give that money to one of your credit companies. Your latte will taste better from the kitchen of your new home!

For more information about CreditAndYou.com and simple steps anyone can use to repair their credit or to get a better understanding of credit scoring visit http://www.creditandyou.com/

Inside Mortgages - Overcoming The Hurdles Of Raising A Down Payment

James R. DeBoth, President--Interest.com

Monday, January 10, 2005
For many first-time buyers, the biggest problem they face is coming up with a large chunk of money for the down payment. Compare to amassing thousands of dollars to buy that first home, finding a home is relatively easy. And getting an affordable home mortgage loan isn't that difficult if you have good credit. Once you have that down payment, plenty of lenders will be eager to loan you money.
Being able to afford monthly mortgage payments does not have to be an issue either. If you are like most people, you can find a mortgage payment that is comparable to the rent you are paying. Even if it is a bit larger, it is still a better deal when you consider the income tax deductions your monthly payments will generate, and the fact that you are building equity in your own home.

None of this can happen, however, unless you come up with a down payment, or find a way to buy a house without one. To avoid having to make a down payment, you usually need to be either a veteran or currently in the military so you can qualify for a no-down-payment VA loan guaranteed by the Department of Veterans Affairs. Or, you have to qualify for a no-down-payment loan. If you don't fit into these categories, you will have to come up with an alternative to raise the money that is needed. There are several ways to raise the money: through savings; by borrowing from others or from your own reserves; a gift; a DAP, or finding something to sell.

Although using your savings is the simplest solution, it also is probably the most difficult. It takes time to save thousands of dollars. You also should consider the long-term costs involved. If you wait until you save the down payment, you will be borrowing less and making smaller mortgage payments. But if you are renting while you are saving, you lose the income tax deductions that mortgage interest generates as well as the opportunity to build equity in a home of your own.

Borrowing down payment money from another source is an option, but you have to be careful here. Lenders need to know how much you owe so they can look at your debt-to-income ratio. The more you owe, the less likely you are to qualify for a low monthly mortgage payment. That's also why lenders want to know how much you make, and how much you have in savings.

You could "borrow" the money from yourself. Let's say you own stocks and bonds that you can borrow against. Since it is your own money you are borrowing, you are not normally required to pay it back. But you will pay interest on the “loan.” In the case of stocks and bonds, that interest is generally deductible on your income tax. In some cases you can also borrow against your life insurance policy. Here again, the loan might not have to be repaid, but the value of the policy is reduced by the amount borrowed, plus interest.

If you do use money from these sources you will very likely need a letter from your broker or insurance agent explaining the fact that you are not required to pay back the "loan." It might not completely solve the problem of coming up with a down payment, but it could reduce the amount you will need and make it more manageable. And if you receive money from a family member, the lender will ask for a letter explaining any sudden or major deposits. You also will likely need what is referred to as a "gift letter" from the person who gave you the money stating that it is a gift, and not a loan that has to be repaid.

Another option is to turn to a DAP (down payment assistance program). Although there are many different programs, most of them work in cooperation with either lenders or sellers that contribute to a pool that makes down payment funds available to first-time buyers, or those who have been renting for several years. In most cases, down payments received from DAPs are gifts that do not have to be repaid. While some DAPs are run by government agencies, others are charitable, and some are church-based. Two of the biggest are AmeriDream, at http://www.ameridream.org/, and Nehemiah, at http://www.nehemiahcorp.org/.

The best way to locate a DAP is to talk to your lender, your local housing authority, city hall, or a legislator. There is a great deal of money available for down payment assistance because even though this money “looks” like charity, it is not. When people buy a house they take better care of it, spend more on upkeep, and, in general, improve their neighborhood and local tax base. It really is a win-win situation.

The last option is to find something-or some things-that can be converted into a down payment. Do you own antiques? A coin or stamp collection? Is there anything you are willing to sell that might help raise at least some of the money needed for that down payment? Do not automatically assume you don't. Instead, take a look at what you have, and see what it is worth. One way to get a rough idea of an item's value is to see what similar things are selling for in the newspaper or at online auctions, like eBay. And then, who knows? Maybe you'll be able to raise some money at a garage sale where you currently rent to start the process of having a home and garage of your own.

Mortgage rates snooze through New Year

Mortgage rates snooze through New Year
By Holden Lewis • Bankrate.com

The mortgage market hit the snooze button over the New Year holiday as rates barely changed.

The benchmark 30-year fixed-rate mortgage fell 2 basis points to 5.81 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.34 discount and origination points. One year ago, the mortgage index was 5.87 percent.

The 15-year fixed-rate mortgage was unchanged at 5.24 percent. The one-year adjustable-rate mortgage rose 2 basis points to 4.38 percent.


Actually, it's a bit misleading to say that rates didn't change much. Treasury yields dipped about 10 basis points the last two days of 2004 in sleepy trading, then perked back up after the party-filled weekend, ending up about where they were a week earlier. Mortgage rates followed.

The wake-up call was delivered Tuesday by the Federal Reserve, which released the minutes of its rate-setting meeting of Dec. 14. At that meeting three weeks ago, the Fed raised short-term interest rates by a quarter-point and proclaimed: "Inflation and longer-term inflation expectations remain well contained."

When the minutes to that meeting were released this week, it turned out that the participants weren't unanimous in the inflation assessment. There weren't any wild-eyed bankers slamming their shoes on the table, yelling that inflation will bury us, but, as the minutes say, "a number of participants cited developments that could pose upside inflation risks." The developments include oil prices that are higher than a year ago, the falling value of the dollar in relation to other currencies, a slowdown in productivity growth, and rising unit labor costs.

Wall Street interpreted the minutes to mean that the Fed is a bit more worried about inflation than investors had believed. That's why Treasury yields and mortgage rates, after dipping last week, rose back to their previous levels this week.

The participants in the Fed meeting also brought up the issue of a possible housing bubble. The minutes say that some of the meeting participants expressed concern over "potentially excessive risk-taking in financial markets" as well as "anecdotal reports that speculative demands were becoming apparent in the markets for single-family homes and condominiums."

Some Fed members are worrying about the frantic increases in home prices. Now, that's a wake-up call.

Mortgage rates snooze through New Year

Mortgage rates snooze through New Year
By Holden Lewis • Bankrate.com

The mortgage market hit the snooze button over the New Year holiday as rates barely changed.

The benchmark 30-year fixed-rate mortgage fell 2 basis points to 5.81 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.34 discount and origination points. One year ago, the mortgage index was 5.87 percent.

The 15-year fixed-rate mortgage was unchanged at 5.24 percent. The one-year adjustable-rate mortgage rose 2 basis points to 4.38 percent.


Actually, it's a bit misleading to say that rates didn't change much. Treasury yields dipped about 10 basis points the last two days of 2004 in sleepy trading, then perked back up after the party-filled weekend, ending up about where they were a week earlier. Mortgage rates followed.

The wake-up call was delivered Tuesday by the Federal Reserve, which released the minutes of its rate-setting meeting of Dec. 14. At that meeting three weeks ago, the Fed raised short-term interest rates by a quarter-point and proclaimed: "Inflation and longer-term inflation expectations remain well contained."

When the minutes to that meeting were released this week, it turned out that the participants weren't unanimous in the inflation assessment. There weren't any wild-eyed bankers slamming their shoes on the table, yelling that inflation will bury us, but, as the minutes say, "a number of participants cited developments that could pose upside inflation risks." The developments include oil prices that are higher than a year ago, the falling value of the dollar in relation to other currencies, a slowdown in productivity growth, and rising unit labor costs.

Wall Street interpreted the minutes to mean that the Fed is a bit more worried about inflation than investors had believed. That's why Treasury yields and mortgage rates, after dipping last week, rose back to their previous levels this week.

The participants in the Fed meeting also brought up the issue of a possible housing bubble. The minutes say that some of the meeting participants expressed concern over "potentially excessive risk-taking in financial markets" as well as "anecdotal reports that speculative demands were becoming apparent in the markets for single-family homes and condominiums."

Some Fed members are worrying about the frantic increases in home prices. Now, that's a wake-up call.

Mortgage Rates Start the Year With Decline

WASHINGTON - Mortgage rates around the country moved lower this week, marking a good start to a new year of home buying.

Freddie Mac's weekly survey of mortgage rates released Thursday showed that rates on 30-year, fixed rate mortgages averaged 5.77 percent for the week ending Jan. 6. That was down from last week's 5.81 percent.

For all of 2004, rates on benchmark 30-year mortgages averaged 5.84 percent, second only to last year's 5.83 percent, the lowest annual rate in Freddie Mac's record keeping.

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Low mortgage rates have powered home sales. Analysts believe sales hit a record high for all of 2004. The housing market is expected to post another good year in 2005, analysts said.

Long-term mortgage rates have remained well-behaved even as the Federal Reserve has boosted short-term interest rates five times in 2004. That's because inflation, while creeping higher, is not currently viewed as an immediate danger to the economy, analysts said.

"Economic news seems to reflect steady growth and low inflation, placing little upward pressure on interest rates," said Amy Crews Cutts, Freddie Mac's deputy chief economist.

"Although we expect mortgage rates will start to trend gently upward over the year, 30-year, fixed- rate mortgage rates should stay under 6 percent, at least through the first quarter," she said.

Some analysts believe rates on 30-year mortgages could climb to around 6.5 percent by the end of this year, which would still be considered low by historical standards. A few think rates could hit 7 percent.

Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, dipped this week to 5.21 percent, from 5.23 percent last week. For one-year adjustable-rate mortgages, rates fell to 4.10 percent this week, from 4.19 percent.

Freddie Mac added another type of mortgage to its weekly survey: a five-year, "hybrid" adjustable- rate mortgage. It's fixed for five years and then adjusts each year thereafter. The rate on that mortgage averaged 5.03 percent this week.

The nationwide averages for mortgage rates this week do not include add-on fees known as points. The thirty-year and one-year adjustable mortgages each carried a 0.7 point fee. Fifteen-year mortgages carried a 0.6 point fee and five-year adjustables carried a 0.5 point fee.

A year ago, rates on 30-year mortgages averaged 5.87 percent with 15-year mortgages at 5.17 percent and one-year ARMs at 3.76 percent. There isn't a figure for five-year adjustables because Freddie Mac just began tracking those rates in its survey released Thursday.

Mortgage Rates Start the Year With Decline

WASHINGTON - Mortgage rates around the country moved lower this week, marking a good start to a new year of home buying.

Freddie Mac's weekly survey of mortgage rates released Thursday showed that rates on 30-year, fixed rate mortgages averaged 5.77 percent for the week ending Jan. 6. That was down from last week's 5.81 percent.

For all of 2004, rates on benchmark 30-year mortgages averaged 5.84 percent, second only to last year's 5.83 percent, the lowest annual rate in Freddie Mac's record keeping.

Site Sponsor


Low mortgage rates have powered home sales. Analysts believe sales hit a record high for all of 2004. The housing market is expected to post another good year in 2005, analysts said.

Long-term mortgage rates have remained well-behaved even as the Federal Reserve has boosted short-term interest rates five times in 2004. That's because inflation, while creeping higher, is not currently viewed as an immediate danger to the economy, analysts said.

"Economic news seems to reflect steady growth and low inflation, placing little upward pressure on interest rates," said Amy Crews Cutts, Freddie Mac's deputy chief economist.

"Although we expect mortgage rates will start to trend gently upward over the year, 30-year, fixed- rate mortgage rates should stay under 6 percent, at least through the first quarter," she said.

Some analysts believe rates on 30-year mortgages could climb to around 6.5 percent by the end of this year, which would still be considered low by historical standards. A few think rates could hit 7 percent.

Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, dipped this week to 5.21 percent, from 5.23 percent last week. For one-year adjustable-rate mortgages, rates fell to 4.10 percent this week, from 4.19 percent.

Freddie Mac added another type of mortgage to its weekly survey: a five-year, "hybrid" adjustable- rate mortgage. It's fixed for five years and then adjusts each year thereafter. The rate on that mortgage averaged 5.03 percent this week.

The nationwide averages for mortgage rates this week do not include add-on fees known as points. The thirty-year and one-year adjustable mortgages each carried a 0.7 point fee. Fifteen-year mortgages carried a 0.6 point fee and five-year adjustables carried a 0.5 point fee.

A year ago, rates on 30-year mortgages averaged 5.87 percent with 15-year mortgages at 5.17 percent and one-year ARMs at 3.76 percent. There isn't a figure for five-year adjustables because Freddie Mac just began tracking those rates in its survey released Thursday.