Posted on: Friday, July 30, 2004

30-year mortgage rate rises to 6.06%

By Martin Crutsinger
Associated Press

WASHINGTON — Rates on 30-year mortgages, which had fallen for five consecutive weeks, reversed course and rose this week above the 6 percent level.

The average rate for a 30-year, fixed-rate mortgage increased to 6.06 percent, Freddie Mac said yesterday in its nationwide survey. That was up from 5.98 percent last week, which had been the first time since late April that rates were below 6 percent.

Since peaking at a high for this year of 6.34 percent the week of May 13, 30-year mortgage rates fell for five consecutive weeks, reflecting in part a slowdown in economic activity. The economy hit what Federal Reserve Chairman Alan Greenspan described in congressional testimony last week as a "soft patch" in June.

Analysts attributed this week's mortgage rate increase to other comments Greenspan made that while the central bank expects it will be able to raise rates in a gradual manner, it will not hesitate to switch to a more accelerated pace should inflation pressures start to appear.

The Federal Home Loan Mortgage Corp., the agency commonly known as Freddie Mac, said its weekly survey found that rates on 15-year, fixed-rate mortgages have risen to 5.49 percent, up from a three-month low of 5.39 percent last week.

Rates on one-year adjustable rate mortgages rose this week to 4.17 percent, up from 4.12 percent last week.

In mid-June 2003, the 30-year mortgage fell to its the lowest level in more than four decades — averaging 5.21 percent for two weeks, a decline that helped spur record sales of new and existing homes and record levels of mortgage refinancings.

While refinancing activity has moderated this year, sales of both existing and new homes are on track to set records in 2005 although analysts believe activity will slow in the second half of this year as mortgage rates move higher.

A year ago, rates on 30-year mortgages averaged 5.94 percent; 15-year mortgages, 5.27 percent percent; and one-year ARMs, 3.67 percent.

The nationwide averages for mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.6 point this week.