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Mortgage rates tumble for 4th week in a row

Polyana da Costa

Mortgage rates fell for the fourth consecutive week as the government shut down for the first time in 17 years.

30 year fixed rate mortgage 3 month trend

30 year fixed rate mortgage 3 month trend

The benchmark 30-year fixed-rate mortgage fell to 4.41 percent from 4.47 percent last week, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.27 discount and origination points. One year ago, that rate stood at 3.52 percent. Four weeks ago, it was 4.72 percent.

The benchmark 15-year fixed-rate mortgage fell to 3.47 percent this week, compared to 3.53 percent last week, and the benchmark 5/1 adjustable-rate mortgage fell to 3.4 percent from 3.41 percent. The benchmark 30-year fixed-rate jumbo fell to 4.58 percent from 4.64 percent.

Weekly national mortgage survey

Results of Bankrate.com's Oct. 2, 2013, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed 15-year fixed 5-year ARM
This week's rate: 4.41% 3.47% 3.40%
Change from last week: -0.06 -0.06 -0.01
Monthly payment: $827.23 $1,177.13 $731.74
Change from last week: -$5.86 -$4.86 -$0.92

Rates have stayed down in recent days partly because investors are concerned about how long the government shutdown will last and how much it will affect the economy, says Bob Moulton, president of Americana Mortgage in Manhasset, N.Y.

"When the government and the Statue of Liberty reopen, rates will probably go back up," Moulton says.

But that won't happen until lawmakers quit playing political games and agree on a budget that would send more than 800,000 federal employees back to work. And until then, the shutdown is expected to cost about $300 million per day in lost work and services, according to estimates by IHS Global Insight.

What good is a low rate if you can't close a loan?

As for the low rates, many borrowers will find they can lock a rate but can't close on their loans until the government is operational again, or at least until the Internal Revenue Service is open. That's because lenders are required to verify a borrower's income documentation with the IRS prior to closing on a loan, and the IRS is mostly closed.

For buyers and refinancers closing in the next two weeks or so, this might not be a problem yet as long as the lender has already verified the borrower's tax information with the IRS.

"But for any new applications that come in, if this turns into a two-week shutdown, their closings will probably be delayed," Moulton says.

Those who worry about delays should consider locking their rate for a longer period, just in case, says Michael Becker, a mortgage banker for WCS Funding in Baltimore

"Don't wait to see if rates will drop lower," he says. "Rates are good, and if it makes sense to lock now, there's no reason to sit on the sidelines."

Some refinancers are back in the game

Some homeowners had missed the boat in refinancing earlier this year. They reconsidered the opportunity as rates dropped in recent weeks. The volume of refinance applications increased 3 percent last week from a week earlier, according to a weekly survey by the Mortgage Bankers Association. Refinance applications had tumbled since rates spiked in May.

But the volume of applications coming from homebuyers decreased 6 percent from the previous week, the MBA says. It may be a sign that the housing market is cooling off after a strong homebuying season in the summer.

Home prices take a break

Home prices increased by 0.9 percent in August from July, according to a report released by CoreLogic this week. That's a slower pace of price appreciation than the 1.8 percent increase seen from June to July.

"In addition to normal seasonality, the recent sharp rise in mortgage rates off their historic lows was a clear driver behind the slowdown," says Anand Nallathambi, president and CEO of CoreLogic. "We anticipate moderate gains in home prices over the balance of this year, supported by the recent downward trend in rates and continued tight supplies of homes in many markets."

No jobs report this week?

Whether the downward trend in rates will continue now depends on various factors, including on how Congress deals with nation's budget and debt ceiling in coming weeks. Usually, rates also are influenced by economic data, including the closely watched monthly employment report by the Department of Labor.

The September report is scheduled to be released Friday, but if the government remains shut, the report won't be issued this week.

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