Mortgage rates fall; housing market hot

WASHINGTON – Rates on 30-year mortgages declined for the seventh time in the past eight weeks, a downward trend that has helped push sales of both new and existing homes to record levels.

Mortgage giant Freddie Mac reported Thursday in its weekly survey that rates on 30-year, fixed-rate mortgages averaged 5.65 percent, down from 5.71 percent last week.

It was the seventh decline in the past eight weeks and pushed the 30-year mortgage down to the lowest level since mid-February.

The steady decline in mortgage rates over the past two months has helped spur housing sales to record levels and prompted some economists to revise their forecasts. Many now believe if mortgage rates rise only gradually for the rest of the year that sales of both new and existing homes could surpass last year’s levels, which would mean the fifth straight year new sales records have been set.

Frank Nothaft, chief economist at Freddie Mac, said that the boom in housing accounted for about 20 percent of economic growth in the first quarter. The government on Thursday reported that the economy grew at a healthy 3.5 percent in the January-March quarter, up from its original estimate that the economy was expanding by just 3.1 percent during the first quarter, the slowest pace in two years.

Nothaft said that this week’s decline in mortgage rates reflected in part financial market happiness with comments made in the Federal Reserve’s minutes released on Tuesday that Fed officials believed inflation pressures had remained contained so far this year.

“When inflation is contained, mortgage rates decline,” Nothaft said.

For 15-year, fixed-rate mortgages, a popular option for refinancing, rates dipped to 5.21 percent this week, down from 5.27 percent last week. One-year adjustable rate mortgages declined to 4.21 percent, down from 4.26 percent last week.

Five-year hybrid adjustable rate mortgages were unchanged this week at 5.07 percent, the same as last week. These hybrid mortgages have a fixed rate for five years and then adjust each year after that.

The nationwide averages for mortgage rates do not include add-on fees known as points. The 30-year and 15-year mortgages carried a nationwide average fee of 0.6 point while the two other categories had an average fee of 0.7 point.

A year ago, 30-year mortgages averaged 6.32 percent, 15-year mortgages were at 5.69 percent and one-year ARMs averaged 3.87 percent. Freddie Mac does not have historical data on the five-year ARM which it began tracking this year.