Long-term mortgage interest rates rose slightly in the latest week, as various economic indicators  proved inconclusive, according to mortgage giant Freddie Mac Thursday.

The average rate on the 30-year fixed rate mortgage rose to 5.07 percent, excluding fees, during the week ended February 26, 2009, up from 5.04 percent. This week’s increase was the first in three weeks. One year ago, the average rate was 6.24 percent.

“Mortgage rates were little changed this week amid mixed data reports of a slowing economy,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Both the core Producer Price and Consumer Price Indexes ticked up in January, higher than the market consensus, while consumer confidence in February fell to the lowest reading since records began in January 1967.”

Nothaft also mentioned that historically low interest rates have failed to jump start the home buying market. “Lower house prices and affordable mortgage rates have yet to spur housing demand,” he added. “For instance, house prices declined by 8.7 percent for the 12 months ending in December 2008 and were down 10.9 percent from their highs set in April of 2007, according to the Federal Housing Finance Agency’s purchase-only monthly home price index. However, existing home sales (excluding condominiums and co-ops) fell 4.7 percent in January to 4.05 million units (annualized), the slowest pace since July 1997.”

Rates on 15-year fixed rate loans were unchanged during the past week, holding stable at 4.68 percent. The average rate last year at this time was 5.72 percent.

The average rate on one-year Treasury-indexed adjustable rate mortgages inched up to 4.81 percent, up from 4.80 percent the week before. One year earlier, the average one-year ARM rate was 5.11 percent.

President Barack Obama met Monday at the White House with the nation’s state governors to garner support for his $787 billion economic stimulus plan, promising that $15 billion of those funds would be released Wednesday to bolster state efforts to provide Medicaid coverage for the poor.

Some governors are excitedly supportive of the entire Obama plan and the allocation of more money.
“We are very anxious to see the loan modification program that the president is proposing as we think it will mesh very closely,” New Jersey Governor Jon Corzine, a Democrat, said at a National Governors Association meeting on Sunday, speaking of his own state’s efforts to stave off foreclosures through court-ordered mediations.

Washington state Governor Chris Gregoire was eager to use federal funding for a similar program, saying, “We desperately need this federal solution.”

Yet many Republican governors have said they would refuse a portion of the offered funds, calling the stimulus package wasteful as well as unnecessary.

“If you look at the number of performing loans versus non-performing loans … the overwhelming bulk of folks across this country … are in fact paying down their mortgages,” South Carolina Governor Mark Sanford, a Republican  said. “There’s a real equity question as to when the folks who have been playing by the rules … have the person across the street bailed out.”

Mississippi Governor Haley Barbour, a Republican, worried about supporting parts of the Obama stimulus plan after the federal dollars stop coming. “If we were to take the unemployment reform package that they have, it would cause us to raise taxes on employment when the money runs out — and the money will run out in a couple of years.”

President Obama tried to assuage fears about the federal money being used inappropriately. “This is not a blank check,” Obama said. “We’re going to work with you closely to make sure that this money is spent the way it’s supposed to.”

He appointed Vice President Joe Biden to supervise the disbursement of the funds and to make sure states are using the money for its intended purposes. He also named Earl Devaney, a former Secret Service special agent and uncoverer of the Jack Abramoff scandal to keep a tight watch on the implementation of all stimulus funds.

Interest rates on long-term mortgage loans fell in the latest week, according to mortgage financier Freddie Mac Thursday, sinking back down toward record low territory as more reports filed in pointing to continued economic distress.

“Mortgage rates followed bond yields lower this week as recent economic reports suggest the economy is still slowing, which reduces the future threat of inflation,” said Frank Nothaft, Freddie Mac vice president and chief economist. “And consumer sentiment fell in February for the first time in three months to near its lowest level since May 1980, while industrial production slowed in January by more than the market consensus. In addition, the Federal Reserve lowered its growth forecasts for this year during its policy-setting meeting on January 27-28, noting a deeper contraction in the economy as the credit crunch tightens.

“Meanwhile, the housing market is not doing any better. New housing construction slowed to an all-time record low of 466,000 homes (annualized) in January since records began in January 1959. And although homebuilder confidence ticked up in February from a record low, builder expectations of sales over the next six months hit a record low since it was first published in January 1985.”

The average rate on a 30-year fixed rate mortgage dropped to 5.04 percent, excluding fees, in the week ended February 19, 2009, down from 5.16 percent the previous week. The current rate is only slightly higher than the all-time record low of 4.96 percent from the week of January 15, 2009. One year ago, the average rate was an entire point higher at 6.04 percent.

Rates on 15-year fixed rate loans also sank, falling to 4.68 percent from 4.81 percent the week before. Last year at this time, the average interest rate was 5.64 percent. One-year adjustable rate mortgages average 4.80 percent, a decrease from 4.94 percent one week earlier. A year ago, the average rate was 4.98 percent.

Aides to U.S. President Barack Obama have announced that his new plan to stem mortgage foreclosures will be unveiled Wednesday in Phoenix.

The Obama administration plan is expected to include $50 billion of funding for use in reducing mortgage payments for qualified homeowners, with the ultimate goal of lowering mortgage costs to 31 percent of borrowers’ incomes.

“We’re faced with an economic emergency here, and we’re going to have to move forward quickly on a number of things,” said senior Obama adviser David Axelrod Sunday on NBC’s Meet the Press. “We can’t drag our feet.”

“We obviously have a major problem  problems with foreclosure, problems with people living on the edge and problems with home values around the country just plummeting,” Axelrod added. “We want to do something that will address all of those things.”

In order to lower mortgage payments, the Obama plan calls for requiring lenders to write down the home loan principal instead of reducing the interest rate. The hope is that a smaller balance will make payments more affordable, turn upside down mortgages right side up again and help people avoid foreclosure and short sales.

“We’re prepared to do what is necessary,” said Lawrence Summers, director of Obama’s National Economic Council, in a Bloomberg Television interview on Saturday. “Going directly at the problem means addressing affordability by addressing payments.”

Even as the White House prepares to release the details of its new mortgage plan, it has been cautioning Americans to be patient with the results of all government bailout and stimulus packages.

“It’s not going to be an overnight turnaround,” Axelrod said, speaking of the $787 billion stimulus bill passed last week in Congress.

White House press secretary Robert Gibbs concurred. “I think it’s safe to say that things have not yet bottomed out,” he told CNN’s State of the Union. “They are probably going to get worse before they improve.”

Both mortgage interest rates and the demand for home loan funding tapered off in the past week, according to separate reports from the Mortgage Bankers Association and mortgage giant Freddie Mac.

Freddie Mac’s Primary Mortgage Market Survey found that during the week ended February 12, 2009, the average rate on a 30-year fixed rate loan, excluding points, fell to 5.16 percent from 5.25 percent the week before. One year ago, the average rate was 5.72 percent.

Rates on the 15-year fixed rate mortgage slid to 4.81 percent, from 4.92 percent one week earlier. Last year at this time, the average rate was 5.25 percent. One-year adjustable rate mortgages averaged a rate of 4.94 percent, growing slightly from 4.92 percent, but still down from last year’s average of 5.00 percent.

“Interest rates for 30-year fixed-rate mortgages are almost 1.5 percentage points below 2008’s peak set on July 24, 2008, offering many homeowners an incentive to refinance,” said Frank Nothaft, Freddie Mac vice president and chief economist. “…The Bureau of Economic Analysis estimated that the weighted average mortgage rate of loans outstanding was about 6.2 percent in the fourth quarter of 2008. As a result, the share of refinancing among the total number of conventional mortgage applications has exceeded 50 percent for the past 11 weeks and averaged 80 percent over this period, according to the Mortgage Bankers Association.”

However the MBA’s weekly survey reported that the total number of mortgage applications was down almost 25 percent during the previous week. The group’s refinance index fell 30.3 percent while the home purchase index dropped 9.8 percent to the lowest level in over 8 years.

The falling demand for mortgage money is apparently a reflection of rates reaching a two month high during the week ended February 6, 2009 as well as people choosing to move back to the sidelines waiting for home prices and interest rates to keep falling.

Home prices will continue to sink another 11 percent in the coming months, resulting in a 36 percent overall decrease in home values, according to report released Monday from Moody’s Economy.com, but the silver lining is that they will bottom out by the end of the year.

“Notwithstanding the intensifying economic gloom, the bottom of the housing downturn is within sight,” chief economist Mark Zandi said in a statement today. “Presuming we see strong action by policymakers to help support the economy and the housing market, prices will begin to recover by the end of this year.”

To date, the 381 metropolitan areas included in the Case-Shiller home price index have experienced a 25 percent decrease on average in home values. Before the end of 2009, Moody’s predicts that 62 percent of those areas will see double-digit declines before the correction is through.

The house prices in Southeast Florida is likely to be hit hardest during the coming year with values in Naples, Florida forecasted to fall 70.1 percent from 2005 to the last quarter of 2010. Moody’s predicts that the next biggest losses with be in Merced, California where prices will probably drop 69.6 percent.

Moody’s predictions are all based on assumptions that the U.S. government will aggressively legislate ways to stimulate the economy. “Policymakers have not yet been able to break the downward spiral that has developed among the sinking housing market, job losses, frozen credit markets, and rising foreclosures,” Zandi said.

Yet, even if the newest bailout package comes together and consumers profit from an expansion of the first-time home buyer tax credit, Moody’s warns that the housing market recovery after 2009 will not not bring growth back to its pre-downturn rate until the end of 2010.

Interest rates on long-term mortgage loans rose to the highest point in six weeks on surprisingly positive economic reports in the latest week, according to data from mortgage financier Freddie Mac Thursday, yet the current rate remains well below historical averages.

“Interest rates for fixed-rate mortgages rose this week amid economic reports that were somewhat better than consensus forecasts had anticipated,” said Frank Nothaft, Freddie Mac vice president and chief economist. “The economy slowed by 3.8 percent in the fourth quarter of 2008, less than the market consensus, with inflationary pressures held at bay. Meanwhile, personal incomes fell by only half as much as some market forecasters predicted.”

“Low mortgage rates and falling house prices have made housing the most affordable in 19 years,” Nothaft added. “The National Association of Realtor’s monthly affordability index rose to an all-time record high in December 2008 since records began in January 1971. As a result, pending existing home sales rose 6.3 percent in December 2008 and were up 2.1 percent from the previous December.”

The average rate on a 30-year fixed rate mortgage, excluding points increased to 5.25 percent during the week ended February 5, 2009, up from 5.10 percent the previous week.  One year ago, the average rate was 5.67 percent.

Rates on 15-year fixed rate loans also rose, climbing to 4.92 percent up from 4.80 percent the week before. Last year at this time, the average rate was 5.15 percent.

One-year Treasury indexed adjustable rate mortgages carried an average rate of 4.92 percent, up slightly form 4.90 percent a week earlier. During the same week of February 2007, the average rate was 5.03 percent.

Interest rates have fallen to all-time record lows during the past month, as economic indicators pointed to harder times ahead. While the newest reports are encouraging, even the current rise in rates does not take them out of the “very affordable” range, making refinancing and home buying a very attractive option right now.

Restoring the strength of the U.S. housing market is at the top of President Barack Obama’s priorities as it is for many members of Congress these days.

In his weekend address, President Obama revealed the possibility of a revised and expanded bailout program for the financial sector. “Soon my Treasury [Department] secretary, Tim Geithner, will announce a new strategy for reviving our financial system that gets credit flowing to businesses and families,” he said in remarks.“We’ll help lower mortgage costs and extend loans to small businesses so they can create jobs. We’ll ensure that CEOs are not draining funds that should be advancing our recovery. And we will insist on unprecedented transparency, rigorous oversight, and clear accountability — so taxpayers know how their money is being spent and whether it is achieving results.”

The House of Representatives passed its own version of a bailout/stimulus package last week that includes tax cuts and new government programs. The President asked the Senate in his weekend speech to quickly pass the House’s bill, called the American Recovery and Reinvestment Act of 2009, in order to speed up the return of economic stability.

Some in the Senate from both parties are pushing, however, for several amendments to the bill before it is passed. Republican Senator Mitch McConnel from Kentucky, for example, wants to see a provision that would make mortgage loans available to good credit home buyers at a 4 percent interest rate, with the government possibly making up the difference between the lower rate and the market rate.

Democrat and Republican senators have called for an extension of the first-time home buyer credit to include all primary residence purchases as well as stretching out the credit amount from $7,500 to $15,000. And Senator Christopher Dodd, D-Conn., would like to the bill to include a90-day moratorium on all foreclosures nationwide.

President Obama was cautious in his hopes for the immediate success of the stimulus bill, however, saying that the “economic recovery will take years — not months.”

“No one bill, no matter how comprehensive, can cure what ails our economy,” he said. “So just as we jump-start job creation, we must also ensure that markets are stable, credit is flowing, and families can stay in their homes.”