Posted on: Friday, August 6, 2004

30-year mortgage rate falls to 5.99%

By Joe Richter
Bloomberg News Service

Rates on 30-year mortgages slipped below 6 percent this week after reports of a cooling economy eased the pressure on borrowing costs, Freddie Mac said.

The average fixed rate on the benchmark 30-year mortgage dropped to 5.99 percent from 6.08 percent. The one-year adjustable rate fell to 4.08 percent from 4.17 percent. The 15-year fixed rate was 5.40 percent, compared with 5.49 percent.

The Commerce Department reported last week that the U.S. economy grew at the slowest pace in more than a year from April through June. The department reported Tuesday that U.S. consumer spending declined in June by the most since the Sept. 11 terrorist attacks. Economists said the figures support the idea that the Federal Reserve will adhere to a "measured" pace of interest-rate increases to hold down inflation.

"Additional economic indicators this week confirmed that June was a weak month for the nation as a whole," Frank Nothaft, chief economist at Freddie Mac, said in a statement. "Mortgage rates have been most accommodating for homebuyers lately."

The 30-year rate moves with yields on the U.S. 10-year Treasury note, which have fallen for seven straight days. At 1:03 p.m. in New York, the 4.75 percent note maturing in May 2014 yielded 4.39 percent, down from 4.32 percent on Wednesday.

The 30-year mortgage rate has fallen from an eight-month high of 6.34 percent reached in the second week of May, and is down from 6.14 at the same time last year. The decline in the rate this week was the sixth in seven weeks.

Freddie Mac's Nothaft said the decline in borrowing costs has helped underpin demand for housing, keeping inventories of home available for sale tight.

Toll Brothers Inc., the largest U.S. builder of luxury houses, said revenue from homebuilding rose 46 percent during the company's fiscal third quarter, which ended Saturday.

The Huntington Valley, Pa., company said today that its backlog of homes ordered and not yet delivered rose to 6,856 units valued at $4.35 billion, compared with 4,392 units, at $2.48 billion, a year earlier.

Freddie Mac, based in McLean, Va., is the second-biggest purchaser of U.S. mortgages. Fannie Mae is the largest.