Posted on: Friday, August 15, 2003
Mortgage rates dip following weeks of increases
| • | Current mortgage rates |
By Jeannine Aversa
Associated Press
WASHINGTON — Rates on benchmark 30-year mortgages, which have been rising steadily since late June, dropped this week, offering a bit of a break to potential home buyers. Refinancing activity, however, continued to slow.
The average rate on 30-year fixed-rate mortgages for the week ending Aug. 15 was 6.24 percent, down sharply from last week's rate of 6.34 percent, which marked the highest rate seen in a year, Freddie Mac, the mortgage giant, reported yesterday in its weekly nationwide survey.
Rates on 30-year mortgages slid to a record low of 5.21 percent the week ending June 13 and stayed at that level the following week.
After that, 30-year mortgage rates began a steady upward swing.
Several factors have contributed to the recent rise in mortgage rates, economists said. They include: signs that the economy is gaining traction; concern about swelling federal budget deficits; and disappointment on Wall Street that the Federal Reserve didn't make a bolder cut to short-term rates on June 25. Those factors have pushed bond rates up, causing long-term mortgage rates to rise.
"The bond market got a little ahead of themselves, causing yields to rise too quickly over the past few weeks," said Amy Crews Cutts, Freddie Mac's deputy chief economist. "This week saw a bit of a correction and mortgage rates fell for the first time in eight weeks. Continued volatility in financial markets, however, will keep rates teetering up and down for some time to come," she added.
Rates on other mortgages also fell this week.
For 15-year fixed-rate mortgages, a popular option for refinancing, rates fell to 5.58 percent this week, down from 5.66 percent last week.
Rates for one-year adjustable mortgages dipped to 3.75 percent, down from 3.80 percent last week.
The recent rise in mortgage rates has cooled home-mortgage refinancing activity, which had been on a red-hot roll before the upward swing in rates.
Applications for new financing deals declined by 20 percent last week from the previous week, the Mortgage Bankers Association of America reported.
"The contraction in mortgage activity continued last week with the level of refinance applications falling to about a third of what they were when they peaked in late May and early June," said Jay Brinkmann, the association's vice president of research and economics.
Refinancing has been an important factor underpinning consumer spending, a main force keeping the economy going.
Economists are hopeful that fatter paychecks and other incentives coming from President Bush's third tax cut will move in to support spending as refinancing slows.
Home sales, however, are still on track to set record highs this year, economists said.
This week's mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.7 point.
A year ago, rates on 30-year mortgages averaged 6.22 percent, 15-year mortgages were 5.63 percent and one-year adjustable mortgages stood at 4.39 percent.
