Posted on: Friday, May 20, 2005

Mortgage rates hit 3-month low

By Jeannine Aversa
Associated Press

WASHINGTON — Rates on 30-year and 15-year mortgages this week dropped to their lowest levels since late February, offering a bit of good news for people wanting to buy a home.

Mortgage giant Freddie Mac reported yesterday in its weekly survey that rates on 30-year, fixed-rate mortgages averaged 5.71 percent, down from 5.77 percent last week.

Analysts attributed the decline in mortgage rates to reduced fears on the part of investors that the economy might face an outbreak of inflation.

"As long as inflation is held in check, there is little or no pressure to push mortgage rates higher," said Frank Nothaft, Freddie Mac's chief economist. Despite high fuel prices, "core" inflation — which excludes food and energy costs — seems to be fairly tame, he said. The gauge of core inflation is watched closely by the Federal Reserve, economists and investors.

For 15-year, fixed-rate mortgages, a popular option for refinancing, rates dipped to 5.27 percent this week, down from 5.33 percent last week.

This week's rates for both 30-year and 15-year mortgages were the lowest since the week ending February 24, when they averaged 5.69 percent and 5.22 percent, respectively.

Rates on five-year hybrid adjustable rate mortgages also declined this week, falling to 5.07 percent, compared with 5.21 percent the week before. These hybrid mortgages have a fixed rate for five years and then adjust each year after that.

Rates on one-year adjustable-rate mortgages, however, rose to 4.26 percent this week, up from 4.23 percent last week.

The nationwide averages for mortgage rates do not include add-on fees known as points. Each mortgage type carried a nationwide average fee of 0.7 point.

A year ago, 30-year mortgages averaged 6.30 percent, 15-year mortgages were at 5.67 percent and one-year ARMs averaged 3.99 percent.

Freddie Mac does not have historical data on the five-year ARM, which it began tracking this year.