Average 30-year mortgage rate dips back below 6 percent

July 25, 2004
BY MARTIN CRUTSINGER
ASSOCIATED PRESS

In good news for home buyers, rates on 30-year mortgages fell below the 6 percent level this week for the first time in three months, although economists said they don't expect rates to stay at this level for long.

Freddie Mac said Thursday in its weekly nationwide survey that rates on 30-year, fixed-rate mortgages fell to 5.98 percent percent this week, down from 6 percent last week. The rate was the lowest since April 22, when rates averaged 5.94 percent.

Since peaking at a high for this year of 6.34 percent the week of May 13, 30-year mortgage rates have been headed lower, reflecting in part a slowdown in economic activity in June.

The economy hit what Federal Reserve Chairman Alan Greenspan last week termed a "soft patch" in June. Greenspan, however, in delivering the Fed's mid-year economic forecast to Congress, sought to allay fears that the slowdown could threaten the sustainability of the current recovery.

He predicted that growth would soon rebound even as the Fed proceeds with what Greenspan indicated should be a gradual pace of interest rate increases.

Frank Nothaft, chief economist at Freddie Mac, said that the Fed's outlook for the second half of this year was "more upbeat than expected."

He said this stronger growth will translate into further increases in mortgage rates and other interest rates set by financial markets, along with the rise in short-term rates controlled by the Fed.

"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.

The Freddie Mac survey found that rates on 15-year, fixed-rate mortgages, a popular option for refinancing, edged down to 5.39 percent this week, the lowest level since late April and down from 5.40 percent last week.

Rates on one-year adjustable rate mortgages rose this week to 4.12 percent, up from 4.02 percent last week.

A year ago, rates on 30-year mortgages averaged 5.67 percent, with 15-year mortgages at 5.0 percent percent and one-year ARMs at 3.58 percent.

The nationwide averages for mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.6 point this week.

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