Posted on: Friday, April 15, 2005

30-year mortgage rates dip again

By Martin Crutsinger
Associated Press

WASHINGTON — Rates on 30-year mortgages fell for a second straight week as bond investors expressed relief that the Federal Reserve has not grown overly concerned about inflation pressures.

In its weekly nationwide survey, mortgage giant Freddie Mac reported yesterday that rates on 30-year, fixed-rate mortgages averaged 5.91 percent this week, down from 5.93 percent last week.

It was the second straight decline since rates at the end of March hit 6.04 percent, the highest they had been since last July.

Analysts attributed this week's decline to the release of minutes of the Fed's meeting of March 22.

The comments of Fed officials summarized in those minutes eased the concerns of investors that the Federal Open Market Committee, the group of Fed officials who set interest rates, was becoming overly worried about inflation pressures and might soon begin raising rates at a much more aggressive pace than the quarter-point moves the Fed has been making since last June.

"The recent release of the minutes of the FOMC meeting muted market chatter about inflation, allowing rates to slip a little further this week," said Freddie Mac chief economist Frank Nothaft.

While mortgage rates had risen for seven straight weeks before the recent two weeks of declines, Nothaft said he believed that future rate increases would be "gradual and restrained."

Nothaft predicted that 30-year mortgages would probably rise only to around 6.5 percent by the end of the year.

Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, fell to 5.46 percent this week, down from 5.48 percent last week.

Interest rates on one-year adjustable-rate mortgages bucked the downward trend and actually rose slightly to 4.30 percent, up from 4.23 percent last week.

Five-year hybrid adjustable rate mortgages averaged 5.31 percent this week, down from 5.33 percent last week. These hybrid mortgages have a fixed-rate for five years and then adjust each year after that.

The nationwide averages for mortgage rates do not include add-on fees known as points. All mortgage categories except one-year ARMS carried a 0.7 point fee this week; one-year ARM carried a 0.6 point fee.

A year ago, 30-year mortgages averaged 5.89 percent, 15-year mortgages were at 5.23 percent and one-year ARMs averaged 3.69 percent. Freddie Mac — the Federal Home Loan Mortgage Corp. — does not have historical data on the five-year ARM that it began tracking this year.