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The Honolulu Advertiser

Posted on: Friday, June 6, 2003

Mortgage rates fall again

 •  Hawai'i mortgage rates

By Jeannine Aversa
Associated Press

For the fourth consecutive week, the average rate on 30-year mortgages dropped to a record low - 5.26 percent nationally. This year may be the second best for home sales.

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WASHINGTON — Mortgage rates around the country tumbled to new lows this week, good news for people looking to buy homes or refinance.

The average rate on 30-year fixed-rate mortgages dropped to a record low of 5.26 percent for the week ending June 5, Freddie Mac, the mortgage giant, reported yesterday in its weekly nationwide survey.

In Hawai'i, the average 30-year mortgage annual percentage rate dropped to 5 percent — a record based on rates from the Honolulu Board of Realtors for 46 statewide lenders.

The national decline in rates marked the fourth-straight week and the ninth time this year that rates on this benchmark mortgage fell to an all-time weekly low.

The previous low rate of 5.31 percent was set last week. The new rate marks the lowest since Freddie Mac began tracking 30-year mortgages in 1971. Records that reach back earlier indicate that the rate is the lowest in more than four decades, economists said.

"Anticipation that the Federal Reserve may well cut rates at its next meeting, combined with further weakness in certain sectors of the economy, caused interest rates to fall once again," said Frank Nothaft, Freddie Mac's chief economist.

Economists said the odds are growing that the Fed will reduce short-term rates by at least a quarter percentage point at its June 24-25 meeting.

For 15-year fixed-rate mortgages, a popular option for refinancing, rates fell to a record low of 4.66 percent this week. That surpassed last week's rate of 4.73 percent. This week's rate was the lowest level since Freddie Mac began tracking 15-year mortgages in 1991.

Rates for one-year adjustable mortgages declined to a new low of 3.59 percent, down from last week's rate of 3.63 percent. Freddie Mac's records on one-year ARMs go back to 1984.

The housing market has managed to shine even as the national economy has struggled under numerous clouds.

Low mortgage rates propelled home sales to record levels last year. This year is shaping up to be the second-best year on record for sales of existing homes and new ones, economists say.

Refinancing activity also is booming, powered by low mortgage rates. Savings from home-mortgage refinancing has underpinned consumer spending, a main force keeping the economy going.

The drop in mortgage rates has "led to a new flood of mortgage applications," said Jay Brinkmann, vice president for research and economics at the Mortgage Bankers Association of America. "While almost 77 percent of the applications are for refinances, applications for mortgages for purchasing homes are also hitting record levels as buyers move to lock in these low rates."

This week's mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages each carried an average fee of 0.5 point this week, while one-year ARMs carried an average fee of 0.6 point.

A year ago, rates on 30-year mortgages averaged 6.71 percent, 15-year mortgages were 6.18 percent and one-year adjustable mortgages stood at 4.71 percent.

"We just keep getting stunned by the performance of long-term mortgage rates," said David Seiders, chief economist at the National Association of Home Builders. "I don't know how low they can go."

Advertiser staff contributed to this report.