Posted on: Friday, August 16, 2002

Mortgage rates fall to another record low

By Jeannine Aversa
Associated Press

WASHINGTON — Rates for 30-year mortgages dipped to a new low this week, providing even more fuel for the mortgage refinancing boom.

In a nationwide survey released yesterday, the mortgage company Freddie Mac reported that the average interest rate on a 30-year fixed-rate mortgage dropped to 6.22 percent, the lowest in 32 years of record-keeping. A year ago, 30-year mortgages averaged 6.92 percent.

Low mortgage rates are feeding a boom in refinancing. Savings or extra cash coming out of refinancing is supporting consumer spending and offsetting such potentially negative factors as the volatile stock market and eroding consumer confidence, economists said.

Mortgage rates have been falling amid growing signs of a sluggish economic recovery and a roller-coaster stock market that has sent investors to the bond market, helping push rates down.

The economy grew by just 1.1 percent in the second quarter of this year, down from a brisk 5 percent in the first quarter. And key reports suggest that the second half of this year got off to a disappointing start. Against this backdrop, the Federal Reserve on Tuesday decided to hold short-term interest rates steady, but opened the door to future reductions.

"The Fed's acknowledgment of weakness in the economy and a flight to quality in the bond market caused fixed-rate mortgages to slide further," said Freddie Mac chief economist Frank Nothaft.

This week's average mortgage rate undercut the previous low of 6.31 percent set last week.

Refinancing activity last week represented 68.8 percent of mortgage loan applications, up from 68.4 percent the previous week, the Mortgage Bankers Association of America reported yesterday.

The average rate on 15-year mortgages, a popular option for refinancing, fell to 5.63 percent this week, the lowest since Freddie Mac began tracking this in 1991.