Several key home-mortgage rates inch up but refinancing boom continues

Associated Press

WASHINGTON — Rates on 30-year mortgages edged up this week after dropping to a new low last week. But rates are still sufficiently low to be attractive to house hunters thinking about buying a home and people who may want to refinance the home that they do own, economists said.

The average interest rate on a 30-year, fixed-rate mortgage rose to 5.95 percent for the week ending Jan. 10, up from 5.85 percent the week before, Freddie Mac reported yesterday in its weekly survey.

Last week's rate was the lowest since the mortgage giant began tracking 30-year mortgage rates in 1971. Records that reach back earlier than Freddie Mac's put last week's 30-year mortgage rate at the lowest level since the early 1960s.

Rates on 15-year fixed-rate mortgages, a popular option for refinancing, also went up this week to 5.33 percent, compared with 5.24 percent in the prior week.

However, for one-year adjustable rate mortgages, rates dipped to 4.03 percent, down from 4.06 percent the previous week.

Low mortgage rates have been fueling not only strong home sales but a surge of home-mortgage refinancing activity. The extra monthly cash that consumers are saving by refinancing their mortgages at lower interest rates is helping to support consumer spending, which has been the main force keeping the economy going.

"Nearly 25 percent of all outstanding mortgages were refinanced in 2002, saving those homeowners an average $1,200 per year to spend or save as they saw fit," said Frank Nothaft, chief economist with Freddie Mac — the Federal Home Mortgage Corp.

"With interest rates as low as they currently are, refinancing will continue to be a viable option for some," he added.

The Mortgage Bankers Association of America said that total home mortgage applications jumped by 24.3 percent for the week ending Jan. 3, getting the housing industry off to a good start in 2003. Refinancing activity accounted for 77.8 percent of total applications, up from 75.9 percent the week before.

"The refinance boom that began in the first week of 2001 is still going strong in 2003," said the association's economist Phil Colling. "Many homeowners who had been waiting for lower rates to refinance were most likely spurred to action," he added.

The mortgage rates do not include add-on fees. Thirty-year mortgages carried an average fee of 0.5 point this week; 15-year mortgages and one-year adjustable mortgages had an average financing fee of 0.6 point.

A year ago, rates on 30-year mortgages averaged 7.06 percent, 15-year mortgages were 6.55 percent and one-year adjustable mortgages stood at 5.26 percent.