March 21, 2008 in Business

30-year mortgage rates hit five-week low

The Associated Press The Spokesman-Review
 

WASHINGTON – Rates on 30-year mortgages dropped below 6 percent this week for the first time in more than a month, reflecting aggressive efforts by the Federal Reserve to cut interest rates.

Freddie Mac, the mortgage company, reported Thursday that 30-year fixed rate mortgages averaged 5.87 percent this week. That was down from 6.13 percent last week and marked the first time that 30-year rates have fallen below the 6 percent level since the week of Feb. 14.

Rates on 30-year mortgages dropped below the 6 percent threshold in the second week of January and stayed there for six straight weeks as the sharp economic slowdown stirred fears of a possible recession.

In the past month, bond markets had grown worried about rising inflation pressures that are coming at the same time that the economy is slowing. But the meltdown of investment bank Bear Stearns over the weekend prompted the Fed to move aggressively to pump money into the financial system and slash a key lending rate by three-fourths of 1 percent on Tuesday.

Analysts said all of these Fed efforts had helped to ease pressure on interest rates that had been generated by higher inflation readings. And helping in that area, the government reported last week that consumer prices were unchanged in February, a significant moderation from the January readings, while retail sales fell by a larger-than-expected amount in February, reinforcing worries about economic weakness.

Rates on 15-year, fixed-rate mortgages fell to 5.27 percent this week, down from 5.60 percent last week.

For five-year adjustable-rate mortgages, rates dipped to 5.56 percent, compared with 5.58 percent last week.

Rates on one-year, adjustable-rate mortgages were the only category to show an increase, edging up to 5.15 percent, compared with 5.14 percent last week.


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