Posted on: Friday, March 14, 2003

Mortgage rates continue to tumble

By Jeannine Aversa
Associated Press

WASHINGTON — For the fourth week in a row, rates on 30-year mortgages fell to a new low, good news for a housing market that has been one of the few bright spots for the struggling economy.

The average interest rate on 30-year fixed-rate mortgages dropped to 5.61 percent for the week ending March 14, Freddie Mac, the mortgage company, reported yesterday in its weekly nationwide survey.

That surpassed the previous record low rate of 5.67 percent set last week. The new rate marked the fourth week in a row and the fifth time this year that rates on the benchmark mortgage dipped to a new weekly low.

This week's rate was the lowest since Freddie Mac began tracking 30-year mortgage rates in 1971. Records that reach back earlier than Freddie Mac's indicate that rate is the lowest since the early 1960s.

Rates for 15-year fixed-rate mortgages, a popular option for refinancing, dipped this week to 4.93 percent, compared with 5.01 percent last week. The new rate is the lowest since Freddie Mac began tracking 15-year mortgages in 1991.

Recent mortgage rate declines were spurred by falling rates in the Treasury bond market, influenced by concerns about a war with Iraq, economists said.

"The escalating tensions within the U.N. over the impending resolution on Iraq and dismal economic news this week sent the stock market tumbling and with it went bond and mortgage rates," said Amy Crews Cutts, an economist with Freddie Mac.

Rates for one-year adjustable rate mortgages, fell this week to 3.68 percent, down from last week's 3.76 percent.

Low mortgage rates propelled home sales and home-mortgage refinancing activity to record levels last year. As consumers swap higher-interest rate home loans for lower-interest rate ones, the extra cash has helped to support consumer spending. So have rising home values.

The Mortgage Bankers Association of America said refinancing activity last week accounted for a record 79.8 percent of total mortgage applications filed.

"People are very aware that (mortgage) rates are at record lows, and they are acting on this," said the association's economist Phil Colling.

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

A year ago, rates on 30-year mortgages averaged 7.08 percent, 15-year mortgages were 6.59 percent and one-year adjustable mortgages stood at 5.08 percent.