US 30-year mortgage rates dip in latest week

Thu Jul 8, 2004

WASHINGTON, July 8 (Reuters) - U.S. mortgage rates fell in the latest week, mortgage finance company Freddie Mac (FRE.N: Quote, Profile, Research) said in a report on Thursday that may ease homebuyers' concerns that a Federal Reserve rate-rise cycle will boost borrowing costs.
U.S. 30-year mortgage rates averaged 6.01 percent in the week ending Thursday, down from 6.21 percent last week, Freddie Mac said. The average was the lowest since 6.01 percent in the week ended April 29, but was up from the year-ago average of 5.40 percent.

Freddie Mac said 15-year mortgages also dropped in the week to an average of 5.42 percent from 5.62 percent the prior week. One-year adjustable rate mortgages followed the downward trend, falling to an average of 4.05 percent from 4.19 percent.

The U.S. central bank last week raised short-term interest rates to 1.25 percent, the first increase in four years, embarking on a likely string of rises to cap inflation.

However, a weak government report on the employment picture for June offset the effect of the Fed rate rise, Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

"Long-term mortgage rates this week fell to levels equal to those experienced in April, reacting in large part to last Friday's news of less than stellar job growth in June," Nothaft said. "This is good news for those who are still house hunting, as lower rates mean more affordable housing."

After three months of strong growth, employers reined in the pace of hiring and trimmed the workweek in June. The U.S. Labor Department said 112,000 jobs were added in the month, less than half the 250,000 expected by Wall Street economists.

Nothaft noted home construction and sales remained strong and forecast home sales by the end of the year would be 2 percent higher than 2003's record high.

New home sales jumped to a record rate of 1.369 million in May, beating forecasts for 1.120 million. More robust spending on home building offset weak spending on commercial and government buildings, the U.S. Commerce Department said last week, while May construction spending climbed up 0.3 percent.

Freddie Mac said lenders charged an average of 0.6 percent in fees and points on 15- and 30-year mortgages, the same as last week. The ARM's charge dipped one percentage point from last week to 0.6 percent.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities for investors or holds them in its own portfolio. (Additional reporting by Glenn Somerville and Mark Felsenthal)

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