Mortgage rates drop on hopes of new Fed cuts

WASHINGTON – Rates on 30-year mortgages fell to the lowest level in six weeks as financial markets grew more hopeful that the Federal Reserve will boost the sluggish economy by cutting interest rates further.

Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages fell to 6.33 percent this week, down from 6.40 percent last week. It was the lowest level since 30-year mortgages dipped to 6.31 percent on Sept. 13, which had been the lowest point since last May.

Analysts attributed this week’s decline to rising expectations that the Fed, which cut a key rate for the first time in four years in September, will trim it again at a meeting next week to try to prevent a severe slump in housing and a credit crunch from derailing the economy in coming months.

“Market concerns about slower economic growth over the next few months allowed mortgage rates to drift lower from last week,” said Frank Nothaft, Freddie Mac’s chief economist. “How much of a drag the housing slump will be on the economy remains unknown.”

Sales of existing homes fell in September by a record 8 percent. Sales of new homes managed a small increase, but analysts said the gain understated the problems facing builders in the wake of the August credit crunch.

Other mortgage rates also fell this week.

“Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, averaged 5.99, down from 6.08 percent last week.

“Rates on five-year adjustable rate mortgages averaged 6.03 percent, down from 6.11 percent last week.

“Rates on one-year ARMs dropped to 5.66 percent, down from 5.76 percent last week.

The mortgage rates do not include add-on fees known as points. Thirty-year mortgages and five-year ARMS both carried a nationwide average fee of 0.5 point. The 15-year mortgage and the one-year ARM both had a fee of 0.6 point.

A year ago, 30-year mortgages stood at 6.40 percent, 15-year mortgages were at 6.10 percent, five-year ARMS averaged 6.14 percent and one-year ARMs were at 5.60 percent.

The worst slump in housing in more than two decades has worsened in recent months in the face of rising mortgage defaults. Many homeowners are having trouble making higher payments now that their low introductory adjustable-rate mortgages are resetting to higher rates. That means even more homes are being dumped on an already glutted market.