Lending Landscape - October 25, 2007

Mortgage rates dropped sharply this week as the ten year bond yields dropped on continued negative economic news. CNNMoney reports -

Fears of a slowing economy over the next few months helped push mortgage rates lower, Freddie Mac reported Thursday.

The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 6.33 percent for the week ended Oct. 25, down from 6.4 percent last week.

Last year at this time, 30-year mortgage rates averaged 6.40 percent.

All other amortization types; 15yr, 5yr and 1yr also saw noticeable drops. With new home sales and existing homes sales reports also showing continued weakness in the national housing market this week, mortgage rates should continue their downward trend.

Perhaps one the most unique situations that will likely affect mortgage rates is the release of 3rd quarter numbers by Countrywide, the nation's largest mortgage company and loan servicer. Wall Street analysts think these figures will give them better insight into the true condition of the housing market. Countrywide has struggled this year with high foreclosure rates and deep financial losses. Their stock has lost over 50% of value since the beginning of the year.

Despite the media's attention to the troubles in the real estate market, the credit crunch of August has been lifted. Lenders are eager to loan money. For those borrowers with documented income and jobs, the mortgage market is actually improving as rates continue to drop.

Besides the Countrywide news affecting mortgage rates in the coming week, the Federal Reserve Board will meet this coming Tuesday and Wednesday to decide policy on short term rates effecting adjustable rate mortgages and home equity lines. The Fed lowered rates when they last met in September.