US 30-15-yr mortgage rates change little in week

Thu Jul 22, 2004

WASHINGTON, July 22 (Reuters) - Interest rates on U.S. 30- and 15-year mortgages fell slightly in the latest week, but mortgage finance company Freddie Mac said on Thursday that rates will likely edge higher at a slow pace this year.

Thirty-year mortgage rates averaged 5.98 percent in the week ended July 22, compared with 6.00 percent last week, Freddie Mac said. It was the first time rates were under 6 percent since an average of 5.94 percent in the April 22, 2004 week.

Freddie Mac said 15-year mortgages were at an average of 5.39 percent, down only slightly from 5.40 percent last week. But one-year adjustable rate mortgages averaged 4.12 percent, up from last week's average of 4.02 percent.

U.S. housing starts unexpectedly plunged 8.5 percent in June to the lowest level in more than a year as rising interest rates cooled the hot housing market, a government report showed earlier this week.

Permits, a sign of builder confidence in future demand, fell to the lowest level since February, posting the biggest monthly decline in more than 10 years, the Commerce Department said.

The housing market decline is to be expected after months of strong performance, Federal Reserve Chairman Alan Greenspan told Congress earlier this week.

"The number is weak, there's no question about that, and definitely below where our expectations are, but we do not believe it's a cause for concern," Greenspan told the Senate Banking Committee.

Greenspan cautioned that despite the economy's recent slowdown, it is gaining momentum.

"Stronger growth in the economy will invariably translate into higher mortgage rates in the future, particularly for ARM products. But this should be offset by job growth and by rising incomes nationwide," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement.

"However, the rise in mortgage rates will be measured, not extreme, and that will help keep the housing industry stable and affordable in the coming months," he said.

Freddie Mac said lenders charged an average of 0.6 percent in fees and points on 30- and 15-year mortgages as well as the ARM, all unchanged from last week.

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.

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