Mortgage Rates Continue to Drop

More news from Freddie Mac: the 30-year fixed-rate mortgage (FRM) was down to 6.44 percent with an average 0.4 point for the week ending August 31, 2006, slipping from last week's 6.48 percent. This rate is the lowest since April of this year. So, it would appear that the Fed's interest policy is benefitting those of us who have to negotiate -- or renegotiate -- mortgages.

Adjustable Rate Mortgages (ARMs) are still a slightly better deal that FRMs. Five-year ARMs fell to 6.11 percent, while one-year ARMS averaged 5.59 percent this week. This means that you could be paying as much as .5 percent less on an ARM than you would with the FRM.

Remember that you pay for the "safety" of a fixed rate. While an FRM means your rate will not go higher than what you have negotiated, it won't drop either. So, if rates continue to drop, your FRM will cost you.

Perhaps the best news is that the market is cooling at a measured pace. The Fed and other analysts seem to think that the monster of inflation has been successfully held at bay, while the housing sector remains strong enough to help the US economic engine. This is the best possible scenario.

I wonder when the sale on "housing bubble" books will happen at my local book store?

Michael

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