Rates on 30-year mortgages near lowest level on record
Thursday, May 8th 2003, 12:00 am
By: News On 6
WASHINGTON (AP) _ Mortgage rates around the country dropped this week, with rates on 30-year mortgages sinking close to the lowest level on record, which was reached two months ago.
For the week ending May 9, the average interest rate on a fixed-rate 30-year mortgage fell to 5.62 percent, down from 5.70 percent registered the previous week, Freddie Mac, the mortgage company, reported Thursday in its weekly nationwide survey.
This week's rate nearly matched the record low rate of 5.61 percent for 30-year mortgages _ set in the week ending March 14. At that time _ right before the United States went to war against Iraq _ jittery investors sought the safe havens of bonds, making bond prices rise and interest rates on bonds fall.
The 5.61 percent rate was the lowest since Freddie Mac began tracking 30-year mortgages in 1971. Records that reach back earlier indicate that the rate is the lowest since the early 1960s.
Low mortgage rates propelled home sales to record levels last year. And this year is shaping up to be the second-best year on record for sales of existing homes and new ones, said David Lereah, chief economist at the National Association of Realtors.
``It is amazing how resilient the American housing system continues to be. Even in the face of recession, terrorist attack and international conflicts, the housing industry is booming, `` said Frank Nothaft, Freddie Mac's chief economist.
Lereah predicts rates on 30-year mortgages will creep up, reaching 6.3 percent by the end of the year.
``That will pinch some buyers at the margins of qualifying for a loan, but will not significantly impact the overall market,'' he said.
For 15-year fixed-rate mortgages, a popular option for refinancing, rates declined to 4.97 percent this week, compared with last week's 5.03 percent rate.
Rates for one-year adjustable mortgages went down to 3.66 percent, even lower than last week's rate of 3.74 percent.
Low mortgage rates also propelled home-mortgage refinancing activity to a record level last year, something that has played a key role in supporting consumer spending. Consumers, the main force keeping the economy going, used the money saved on their monthly mortgage payments to make other purchases.
This week's mortgage rates do not include add-on fees known as points. Each loan type carried an average fee of 0.7 point this week.
A year ago, rates on 30-year mortgages averaged 6.79 percent, 15-year mortgages were 6.27 percent and one-year adjustable mortgages stood at 4.80 percent.
Against the backdrop of a listless economy, low mortgages rates ``are a positive economic fundamental for future growth, and we need every positive we can possibly get right now,'' said Richard Yamarone, economist with Argus Research Corp.