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The Honolulu Advertiser
Posted on: Friday, May 16, 2003

Mortgage rates set record again

Advertiser Staff and News Services

Rates on 30-year mortgages dropped to a record low this week, the sixth time that has happened this year.

The average interest rate on a fixed-rate 30-year mortgage fell to 5.45 percent nationwide, down from 5.62 percent the week before, Freddie Mac, the mortgage company, reported yesterday in its weekly nationwide survey.

In Hawai'i, the average 30-year mortgage fell to an annual percentage rate of 5.23, according to more than 40 lenders listed on the Honolulu Board of Realtors Web site. The Hawai'i rates include add-on fees known as points and the national rates do not.

The national rate dipped past the previous low of 5.61 percent, set the week ending March 14. The new rate is 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.

The lower rates were welcomed by those in the Hawai'i real estate industry who are enjoying the strongest boom since the late 1980s and early 1990s.

"(Lower rates) allow a new group of potential home buyers to get into the marketplace that may not have been able to at the higher rate," said Herb Conley, managing director of Coldwell Banker Pacific Properties, the state's largest residential real estate firm.

Harvey Shapiro, research economist for the Honolulu Board of Realtors, said, "The housing market is really holding up the economy. It's been the strongest sector of the economy both locally and nationally, and we have interest rates to thank."

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

For 15-year fixed-rate mortgages, a popular option for refinancing, rates declined to 4.84 percent this week, compared with last week's 4.97 percent rate. In Hawai'i, the average 15-year annual percentage rate was 4.74.

Low mortgage rates also pushed home-mortgage refinancing activity to a record level last year, something that has played a key role in supporting consumer spending. Consumers, the main force keeping the economy going, used the money saved on their monthly mortgage payments to make other purchases.

The Mortgage Bankers Association of America said that applications for mortgages jumped last week as mortgage rates dipped. Refinancing activity accounted for 72.4 percent of all mortgage applications filed last week, up from 68.7 percent the week before, the association said.

"Strong purchase and refinance indexes reflect consumers responding to those low (mortgage) rates," said Phil Colling, an economist with the association.

A year ago, rates on 30-year mortgages averaged 6.89 percent, 15-year mortgages were 6.37 percent and one-year adjustable mortgages stood at 4.81 percent.