Posted on: Friday, April 8, 2005

30-year mortgage rate now 5.93%

By Courtney Schlisserman
Bloomberg News Service

WASHINGTON — The average rate on a 30-year mortgage in the United States fell this week for the first time since February, according to Freddie Mac.

The rate fell to 5.93 percent, the lowest in three weeks, from 6.04 percent the previous week, according to the survey by Freddie Mac, based in McLean, Va. The last time rates fell was for the week ended Feb. 11, when the average was 5.57 percent.

The yield on U.S. Treasuries, which mortgage rates tend to follow, fell last week as weaker-than-expected reports on the labor market eased concerns about inflation pressures from rising wages and spending. Freddie Mac expects mortgage rates to average 6.2 percent this year, which may still support home sales.

"Although mortgage rates will rise this year, we expect the 2005 annual average will be below levels recorded just three years ago," Frank Nothaft, chief economist at Freddie Mac, said yesterday.

Sales of new and existing single-family homes probably will total 6.93 million in 2005, which would make it the second-best year on record after last year's 7.16 million. A month ago Nothaft forecast sales would be 6.95 million.

Mortgage lending probably will total $2.34 trillion in 2005, Freddie Mac said yesterday, down from $2.73 trillion last year. Freddie Mac is the second-biggest purchaser of U.S. mortgages behind Fannie Mae.

The monthly borrowing costs for every $100,000 of a mortgage would be $595.06 based on the 30-year rate reported yesterday.

The one-year adjustable mortgage rate dropped to 4.23 percent this week, from 4.24 percent.

The 15-year fixed rate declined to 5.48 percent from 5.58 percent, Freddie Mac said.

"Mortgage rates slipped this week on news that job creation in March came out much lower than had been expected," Nothaft said.

"This would indicate there is less money being spent and therefore less inflationary pressure on the economy."

The U.S. added 110,000 jobs in March, the Labor Department said on April 1, down from 243,000 in February.

U.S. initial jobless claims fell last week to 334,000, from 350,000, the government said yesterday. That level is close to figures reported during March.

Federal Reserve Bank of Philadelphia President Anthony Santomero cautioned against putting too much stock in last month's employment report alone.

"Making too much of any one monthly number is ill-advised," Santomero said in a speech to the National Economists Club in Washington.

"The fact is that monthly employment gains have averaged nearly 180,000 jobs per month over the past 12 months."

For the first three months of this year, the average is 159,000.