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Rates drop on 30-year mortgages

Associated Press

WASHINGTON — Rates on 30-year mortgages declined for a third consecutive week as bond investors worried that Hurricane Katrina and soaring energy prices will slow the economy.

Mortgage giant Freddie Mac reported Thursday that rates on 30-year, fixed-rate mortgages fell to a nationwide average of 5.71 percent this week, down from last week’s 5.77 percent. Rates are now at their lowest point since mid-July and significantly below the four-month high of 5.89 percent, which hit during the week of Aug. 11.

Analysts said the continued low mortgage rates were helping to keep housing markets red hot and predicted that rates could go still lower, given an expected economic slowdown from the hurricane and rising energy prices.

“Market jitters about high energy costs and the spill over into other sectors of the economy have led to a decline in bond yields, which typically mean lower mortgage rates,” said Frank Nothaft, Freddie Mac’s chief economist.

Nothaft said that speculation that the possible economic slowdown will cause the Federal Reserve to pause in raising interest rates could also contribute to further declines in mortgage rates.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, averaged 5.32 percent this week, down from 5.35 percent last week.

One-year adjustable rate mortgages edged down slightly to 4.48 percent from 4.56 percent. Two weeks ago, one-year ARMs had hit the highest level in more than three years at 4.58 percent. Rates on five-year hybrid adjustable rate mortgages averaged 5.30 percent this week, unchanged from last week.

The nationwide averages for mortgage rates do not include add-on fees known as points.

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