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The Honolulu Advertiser

Posted on: Friday, June 10, 2005

Mortgage rates continue to fall

By Martin Crutsinger
Associated Press

WASHINGTON — Rates on 30-year mortgages fell again this week, dropping to the lowest point since the spring of 2004, according to a nationwide survey.

Mortgage giant Freddie Mac said yesterday its weekly survey showed that rates on 30-year, fixed-rate mortgages averaged 5.56 percent, down from 5.62 percent last week.

It marked the ninth decline in the past 10 weeks and pushed rates down to the lowest level since they averaged 5.52 percent the week of April 1, 2004.

The steady decline in mortgage rates over the past two months has helped spur sales of both new and existing homes to record levels in April and analysts predicted further strong sales in May. The most recent drop in rates was attributed to the weaker-than-expected jobs report last week which showed businesses added just 78,000 workers to their payrolls, the poorest showing in nearly two years.

"The May employment report came in at less than half of what was expected last month, which pushed bond yields — and mortgage rates — down further," said Frank Nothaft, chief economist at Freddie Mac.

Nothaft said the continued declines in mortgage rates had prompted him to revise down his forecast for where rates will be at the end of the year. He said he expected 30-year mortgages will likely end up between 5.9 percent and 6.2 percent, down from the 6.5 percent he had expected.

In congressional testimony, Federal Reserve Chairman Alan Greenspan said yesterday that low mortgage rates were contributing to some "froth" in local markets, but he said he did not believe there was a national housing bubble similar to the situation in the stock market when a speculative boom pushed stock prices to all-time highs before the bubble burst in early 2000.

Greenspan said he was concerned about the dramatic increase in interest-only mortgages and the introduction of relatively exotic forms of adjustable-rate mortgages.

"To the extent that some households may be employing these instruments to purchase a home that would otherwise be unaffordable, their use is beginning to add to the pressures in the marketplace," Greenspan told the Joint Economic Committee.

For 15-year, fixed-rate mortgages, a popular option for refinancing, rates dipped to 5.14 percent this week, down from 5.2 percent last week.

Rates on one-year adjustable rate mortgages fell to 4.21 percent after rising slightly to 4.26 percent last week.

For five-year hybrid adjustable rate mortgages, rates fell to 5.01 percent, down from 5.1 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. The 30-year mortgage carried a nationwide average fee of 0.6 point while the 15- and five-year mortgages both had fees of 0.5 point and the one-year ARM had an average fee of 0.7 point.

A year ago, 30-year mortgages averaged 6.28 percent, 15-year mortgages were at 5.67 percent and one-year ARMs averaged 4.14 percent.