Posted on: Friday, September 19, 2003

30-year mortgage rate falls for second week to 6.01%

By Jeannine Aversa
Associated Press

WASHINGTON — Rates on benchmark 30-year mortgages, which had been on a fairly steady upward climb since late June, dropped sharply this week for the second week in a row.

The average rate on 30-year mortgages fell to 6.01 percent for the week ending today from last week's 6.16 percent, Freddie Mac, the mortgage giant, reported yesterday in its weekly nationwide survey. This week's rate was the lowest since late July, when rates on 30-year mortgages averaged 5.94 percent.

Rates for other mortgages also went down.

For 15-year fixed-rate mortgages, rates dipped to 5.30 percent this week, compared with 5.46 percent last week. Rates for one-year adjustable mortgages went down to 3.81 percent from 3.87 percent.

In the middle of June, rates on benchmark 30-year mortgages had slid to 5.21 percent, the lowest level in more than four decades.

But since late June, rates on 30-year mortgages as well as other types of mortgages have mostly been on the rise. Factors contributing to the recent rise include signs that the economy is picking up speed and concern about swelling federal budget deficits, economists say. Those factors had pushed bond rates up, which caused long-term mortgage rates to rise. Rates on 30-year mortgages hit a high this year of 6.44 percent in early September.

"Financial markets are feeling more confident that the Fed will not raise rates anytime soon," said Frank Nothaft, Freddie Mac's chief economist. "Add to that the fact that recent economic data show core inflation (excluding food and energy costs) is less than the market expects, and we see mortgage rates drop once again."

The Mortgage Bankers Association of America said the drop helped to boost applications of loans to buy homes last week, although applications to refinance dipped.