August 15, 2004
BY MARTIN CRUTSINGER
ASSOCIATED PRESS

Rates on 30-year mortgages dipped to the lowest level in nearly four months last week, providing more support for the booming housing market.

Freddie Mac, in its weekly nationwide survey, said Thursday that rates on 30-year, fixed-rate mortgages fell to 5.85 percent. That's down from the average rate of 5.99 percent the previous week and is the lowest level for 30-year mortgages since early April.

This year rates on 30-year mortgages hit a high of 6.34 percent the week of May 13. Since then, they have drifted down slowly, reflecting in part what Federal Reserve Chairman Alan Greenspan called a "soft patch" in economic activity in June.

Analysts attributed last week's drop to the government report Aug. 6 that the country created only 32,000 jobs in July, far below the 200,000-plus jobs analysts expected.

"Last Friday's unexpectedly weak employment report caused interest rates on long-term Treasury bonds and, by extension mortgage rates, to fall as investors worried about the health of the U.S. economy," said Freddie Mac economist Amy Crews Cutts.

She noted that the decline in mortgage rates occurred even though the Federal Reserve boosted a key short-term rate by a quarter-point on Tuesday while providing an assessment that the current slowdown should be temporary.

"The Fed's cautiously optimistic outlook calmed the market," Cutts said. "As a result, 30-year fixed mortgage rates should stay steady near or just below 6 percent for a while, giving prospective home buyers another chance to get in with a low rate."

Sales of existing and new homes are expected to set records this year as home buyers continue to respond enthusiastically to low mortgage rates.

The new Freddie Mac survey showed that rates on 15-year, fixed-rate mortgages, a popular option for refinancing, also declined last week to 5.24 percent, down from 5.40 percent the previous week. For one-year adjustable rate mortgages, rates stayed steady at 4.08 percent this week.

Nationwide averages for mortgage rates do not include points. All three classes of mortgages carried an average 0.6-point fee.

A year ago, rates on 30-year mortgages averaged 6.31 percent, 15-year mortgages were at 5.46 percent and one-year ARMs averaged 3.80 percent.

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