August 13, 2004 in Business

Mortage rates drop to lowest level since April

Associated Press
 

WASHINGTON – Rates on 30-year mortgages dipped to the lowest level in nearly four months this week, providing more support for the booming housing market.

Freddie Mac, in its weekly nationwide survey, said Thursday that rates on 30-year, fixed-rates mortgages fell to 5.85 percent this week. That’s down from the average rate of 5.99 percent last week and is the lowest level for 30-year mortgages since early April.

Rates on 30-year mortgages hit a high this year of 6.34 percent the week of May 13. Since then, they have slowly drifted downward, reflecting in part what Federal Reserve Chairman Alan Greenspan has called a “soft patch” in economic activity in June.

Analysts attributed this week’s drop to the government report last Friday that the country created only 32,000 jobs in July, far below the 200,000-plus jobs analysts had been expecting.

“Last Friday’s unexpectedly weak employment report caused interest rates on long-term Treasury bonds and, by extension mortgage rates, to fall as investors worried about the health of the U.S. economy,” said Freddie Mac economist Amy Crews Cutts.

She noted that the decline in mortgage rates occurred even though the Federal Reserve boosted a key short-term rate by a quarter-point on Tuesday while at the same time providing an assessment that the current slowdown should be temporary…

“The Fed’s cautiously optimistic outlook calmed the market,” Cutts said. “As a result, 30-year fixed mortgage rates should stay steady near or just below 6 percent for a while, giving prospective homebuyers another chance to get in with a low rate.”

Sales of both existing and new homes are expected to set new records this year as homebuyers continue to respond enthusiastically to low mortgage rates.

The new Freddie Mac survey showed that rates on 15-year, fixed-rate mortgages, a popular option for refinancing, also declined this week to 5.24 percent, down from 5.40 percent last week. For one-year adjustable rate mortgages, rates stayed steady at 4.08 percent this week.

The nationwide averages for mortgage rates do not include add-on fees known as points. All three classes of mortgages carried an average 0.6 point fee this week.

A year ago, rates on 30-year mortgages averaged 6.31 percent with 15-year mortgages at 5.46 percent and one-year ARMs at 3.80 percent.

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