Freddie Mac reported today that the average rate on a 30-year fixed rate mortgage loan fell to 5.14 percent, excluding points during this last week, down from 5.20 percent the week before. This is the third consecutive weekly rate drop and is certainly good news for mortgage applicants and lenders alike.

But the flip side is that rates are down because the economy is not moving very quickly. Freddie Mac chief economist and vice president Frank Nothaft said:

“The latest economic reports were influenced by recent energy-cost movements. Although higher gasoline prices fueled a 0.7 percent monthly jump in the consumer price index for June, the index was down 1.4 percent from June 2008 and represented the largest 12-month drop since January 1950.”

What’s more, a new report from the RealtyTrac, a foreclosure data tracking company, says that foreclosures are continuing to jump higher. There were 1.53 million homes in the foreclosure process in the first half of this year, a 9 percent increase from the previous six months and a 15 percent hike from the same time last year.

Said James J. Saccacio, chief executive officer of RealtyTrac:

“Foreclosure activity continues to increase to record levels. Unemployment related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes are now worth represent a potentially significant future risk.”

So if you have a job and you want a new mortgage loan, now is your time…if you can qualify for funding. But at least rates are down!

After rising last week on news of slowing job loss and Dow Jones gains, mortgage interest rates showed little movement this week. Mixed economic news kept things from changing much.

According to mortgage giant Freddie Mac today, the average rate on a 30-year Fixed Rate Mortgage inched up to 4.86 percent, from 4.84 percent the previous week. But to put things in perspective, the current rate is still way below the average 6.01 percent rate from the same time last year.

Freddie Mac’s vice president and chief economist Frank Nothaft said that rates stayed relatively unchanged on alternating rising unemployment and increased housing affordability.

“The economy lost 539,000 jobs, less than the monthly job loss of the past five months, and the unemployment rate rose to 8.9 percent…Relatively low house prices and interest rates are clearly helping first-time homebuyers. Housing affordability for the median first-time buyer reached an all-time record high in the first quarter since the NAR index began in 1981. Consequently, first-time homebuyers accounted for half of existing home sales in the first three months of this year, the NAR reported.”

Looking back over the past two months of mortgage rate averages, rates have only fluctuated within a 0.20 percentage point range, generally slipping down for a few weeks and then jumping back up for a week before sliding downward again. The fact that the range has been so limited tells me that overall not much is happening (yet, at least) in the mortgage market. And I don’t see rates moving much higher than 5 percent before some seriously positive signs come in the form of rising home sales and median price home values. It may happen gradually, it may be dramatic, but whatever it is, it hasn’t happened yet for the U.S. housing market.

When trouble in the financial markets made mortgage money hard to come by recently, jumbo loans became doubly hard to get. These large loans, greater than the Freddie Mac and Fannie Mae conforming loan limits of $417,000 in most parts of the country, became much too risky for many banks to have on their books. But things may be changing soon.

According to a recent Wall Street Journal article, Bank of America is the first to start advertising low rates on jumbo loans again. “We decided it was time to really go after that market,” says Vijay Lala, a Bank of America product management executive. The bank is now offering 30-year fixed rate jumbo loans with interest rates in the upper 5 percent range.

Interest rates on average, have started to come down for mortgage interest rates, reflecting in part the dramatic drops in conforming interest rate averages, that now hover just under 5 percent for 30-year fixed rate mortgages (FRMs).  During the week ended, the national average for 30-year jumbo FRM loans was 6.5 percent, the lowest rate since May 2007, according to consumer loan information publisher HSH Associates.  Such rates are much more palatable to consumers than they were during the second half of 2008. The rates peaked at 7.9 percent during the week of October 31.

When the mortgage crisis made investors pull back from mortgage-backed securities, this was especially true of jumbo loans. The large mortgages are not bought by Freddie and Fannie, meaning that if there are no institutional buyers for them these large, riskier loans stay on the banks’ own books. But now, as the credit markets are beginning to loosen up and banks have more liquidity as Americans pull their money out of stocks and invest in safer venues, banks have more cash to make these type of large and profitable loans.

Yet while many lenders may start to lower their jumbo rates to compete with Bank of America, the loans may still require borrowers to jump through high hoops and hurdles. For example, those who apply for the Bank of America jumbo loan, must have a credit score of 720 or better, and contribute a full 20 percent as a down payment. Plus borrowers, must prove they have six months or more of reserves sitting in the bank.

For those worried about qualifying, it is always good to check first to see if a jumbo loan is required. While almost any home in California and parts of Florida required a jumbo during the housing boom, today housing prices have dropped significantly in the former real estate hot spots, and Fannie Mae conforming limits have risen in some of those regions, reaching $729,750 in the highest prices ares of the country.