Mortgage rates inch downward

NEW YORK (CNNMoney.com) -- Mortgage rates slipped last week, according to a weekly survey released Thursday.

The average 30-year fixed mortgage fell to 5.37% for the week ended March 11, according to Bankrate.com. Rates were little changed from four weeks ago, when they averaged 5.34%.

The average jumbo 30-year fixed rate rose to 6.99% from 6.77% in the prior week.

The average 15-year fixed rate mortgage slipped to 4.88% from 4.94% a week earlier.

Adjustable-rate mortgages were also mixed, with the 1-year ARM rising to 5.58% from 5.43%; the 5/1 adjustable-rate mortgage decreasing to 5.34% from 5.39%.

"Downward pressure on rates is certainly welcome news, but there's no clear direction at the moment that we can discern," according to Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information.

A year ago, the average 30-year fixed mortgage rate was 6.39%, meaning a $200,000 loan would have carried a monthly payment of $1,249.70, according to Bankrate.com. With the average rate now at 5.37%, the monthly payment for the same size loan would be $1,119.32, a savings of $130.38 per month.

The lack of private investment in the mortgage market has kept rates from climbing back toward those year-ago rates, Gumbinger said. Most of the mortgage financing is coming from government-backed institutions such as Fannie Mae (FNM, Fortune 500), Freddie Mac (FRE, Fortune 500) and the Federal Housing Administration.

"There are very few investors interested in investing in mortgage-backed securities," said Gumbinger.

Low mortgage rates spurred an 11.3% growth in applications last week, according to a report from the Mortgage Bankers Association. Most of them were from existing homeowners seeking refinancing.

However, many of the requirements that borrowers need to meet to obtain a home loan - such as a large down payment, good credit or home equity (for refinancing) - are increasingly difficult to meet. "A lot of borrowers find themselves unable to get over the hurdles to get today's lower rates," Gumbinger said.

An increasing number of existing homeowners have found themselves owing more on their homes than what they are worth - a problem that led to an unexpected jump in foreclosures last month, according to a report released Thursday.

Congress is currently debating a bill that would allow bankruptcy judges to reduce mortgage debt for bankrupt homeowners as a last resort for preventing foreclosure.

Supporters say the bill will significantly reduce the foreclosure rate, but opponents say that mortgage modification could further pull investment out of the mortgage market.

Allowing judges to modify loans would add a new layer of risk for mortgage investors, which would drive up costs and thus mortgage rates, according to Gumbinger. "This is not a well-trodden path, nor is it well understood," he said.

Bankrate.com's national weekly mortgage survey is conducted each Wednesday from data provided by the top 10 banks and thrifts in the top 10 markets.