WASHINGTON — Mortgage rates, now at about 12%, will continue to decline, Housing and Urban Development Secretary Samuel R. Pierce Jr. said Wednesday.
Speaking at a ceremony marking the placement of the 100,000th Government National Mortgage Assn. residential mortgage security pool, Pierce said: "I think they'll drop a bit more." He declined to say how much more.
GNMA, which is a part of HUD, combines mortgages and sells them to investors to make more money available for home loans.
Pierce said GNMA "has helped more than 4 million low- and moderate-income families achieve homeownership" since its creation in 1968. GNMA sells loans guaranteed or insured by the Veterans Administration, Federal Housing Administration and Farmers Home Administration.
Mark J. Riedy, president of the Federal National Mortgage Assn., which does the same thing with conventional loans, said a week ago that he sees a slight decline from the approximately 12% rate currently charged for a conventional 30-year fixed-rate home loan.
The VA mortgage rate ceiling is 11.5%.
"Mortgage interest rates at worst will stay flat and possibly continue to decline for at least several months, Riedy said. He said the rate may drop to 11.5% before year's end.
Warren Lasko, executive vice president of the Mortgage Bankers Assn., said Wednesday that there has been a slight increase in rates since Riedy made his statement, but he doubted that the increase would last. However, he said, "I don't think they're going down any further."
"The signals are really mixed," Lasko said in an interview, pointing to strength in capital goods spending but a weakness in auto sales.
Lasko said he thought the Federal Reserve Board would wait to see what effect its most recent rate reduction would have on home and auto sales before reducing the rate any more.
The National Assn. of Realtors reported Tuesday that sales of existing homes declined 1% in May.