Interest rates ease from upward trend

A string of economic reports friendly to U.S. Treasury securities, and a pledge from the Federal Open Markets Committee to keep interest rates low "for a considerable period," resulted in strong buying, causing yields to fall. Also adding to the rally was a successful auction of five- and 10-year notes and significant buying from the Far East. Treasury yields hit their lowest levels since the end of July, and mortgage lenders who base their interest rates on yields reduced rates on most of their mortgage products.

The 30-year fixed-rate mortgage (based on zero discount points) fell to 5.75 percent, while the 15-year fixed-rate mortgage dropped to slightly below 5.125 percent. The introductory rate on the one-year adjustable-rate mortgage fell to just above 3.625 percent.

Refinancings declined for the week ended Sept. 12 after surging the previous week, according to the Mortgage Bankers Association. Refis fell 15.4 percent and were responsible for less than half of all applications. Purchase applications, however, rose 5.8 percent.

Economic indicators released this week told Treasury traders just what they wanted to hear. The producer and consumer prices indices, which measure inflation, found none, and the FOMC verified that "inflation becoming undesirably low remains" a risk to the economy.

Bill Steele is financial editor of Interest.com -- a national publisher of mortgage rates and information.

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