Current Mortgage Rates Hit Applications Index

The current mortgage rates, as of 6:00am ET this morning, for a 30-year FRM was 5.34%. Homeowners looking for a 15-year FRM could get a rate of 4.84%. Even with the offer of an $8,000 tax credit, first-time home buyers are also not enticed.

Mortgage refinancing applications, one of the two measurements of the application index, fell last week by 23%. New home applications fell that same week 3.5%. A drop in Treasury yields, and in turn an eventual lowering of mortgage rates, should help push the index back up by the end of the month.

The key to these measurements in the short-term will be any announcements coming from the Federal Reserve's next meeting on June 23 and 24. Some Reserve officials have expressed concern of inflation. The question remains as to if the Feds will continue or even increase the current rate of purchasing government bonds to counter the nation's growing deficit. Worry of inflation and a continued devaluation of the U.S. dollar spiked yields on benchmark 10-year Treasuries, bringing up mortgage rates with it.

With another Fed meeting scheduled for August it is likely the current rate will hold until then. Some officials say they are not overly concerned with the recent rise in yields and believe a steadying will take place. There was a drop in yields last week during a sale of bonds, leading to a slow down in the rate of rise of national mortgage rates.

Continued improvement in the nation's housing market is key for economic recovery as a whole. The rise in mortgage rates could not have come at a worse time in terms of economic recovery. The seasonal spike in gasoline prices and rises in other commodities lower consumer spending power and cut down on discretionary spending. A rise in the cost of living that was lower than forecasts predicted and the drop in the consumer price index since last summer are helping though. A forecast drop in home prices should also help offset mortgage rate worries in the near future.