Posted on: Friday, December 17, 2004

Fixed-rate mortgage interest declines

By Jeannine Aversa
Associated Press

WASHINGTON — Rates on 30-year and 15-year mortgages dipped this week, good news for prospective home buyers.

Freddie Mac's weekly survey released yesterday showed that rates on 30-year, fixed-rate mortgages declined to 5.68 percent, compared with 5.71 percent last week. This week's rate was the lowest since late October.

Rates on 30-year mortgages hit a high this year of 6.34 percent the week of May 13. After that, rates, while bouncing around, drifted lower, as the economy moved through a soft spot and settled into modest growth path, easing inflation fears.

Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, sank to 5.11 percent this week, from 5.14 percent last week.

But one-year adjustable rate mortgages rose to 4.18 percent, up from last week's 4.15 percent.

The nationwide averages for mortgage rates do not include add-on fees known as points. Thirty-year and 15-year mortgages each carried a 0.6 point fee. One-year ARMs carried a 0.7 point fee.

A year ago, rates on 30-year mortgages averaged 5.88 percent; 15-year mortgages, 5.24 percent; and one-year ARMs, 3.77 percent.

Low mortgage rates have powered home sales, which are expected to hit new highs for 2004.

But a sign emerged yesterday that the housing market — a solid contributor to economic growth — may be losing momentum.

A Commerce Department report showed that the number of housing projects for which builders broke ground in November plunged 13.1 percent from the previous month, the biggest decline in nearly 11 years. That left the number of housing projects started at a seasonally adjusted annual rate of 1.77 million units, the lowest level since May 2003.

The sharp drop "suggests demand is softening and the housing market may finally be showing signs of fatigue," said Sherry Cooper, chief economist at BMO Nesbitt Burns.

But others disagreed. "With December's mortgage rates continuing to dip even further, we expect housing starts will bounce back fairly quickly," said Frank Nothaft, chief economist for Freddie Mac, the Federal Home Loan Mortgage Corp.