ICS Magazine

U.S. 30-year mortgage rates lowest since April

August 12, 2004
WASHINGTON, Aug 12 (Reuters) - Interest rates on U.S. 30-year mortgages fell under 6 percent for a second straight week and were at their lowest averages since early April, mortgage finance company Freddie Mac said on Thursday.

U.S. 30-year mortgage rates averaged 5.85 percent in the week ended Aug. 12, down from 5.99 percent a week earlier, Freddie Mac said. It was the lowest since an average of 5.79 percent in the week ended April 8, 2004.

Freddie Mac said 15-year mortgages stood at an average of 5.24 percent, also down from 5.40 percent last week and the lowest since they averaged 5.23 percent in the April 15, 2004 week.

One-year adjustable rate mortgages averaged 4.08 percent, unchanged from last week.

"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," Amy Crews Cutts, Freddie Mac deputy chief economist, said in a statement.

"The Fed's (Federal Reserve) rate hike on Tuesday was expected and the Fed's cautiously optimistic outlook calmed the market," she added. "As a result, 30-year fixed mortgage rates should stay steady near or just below 6 percent for awhile, giving prospective homebuyers another chance to get in with a low rate." Last week the Labor Department reported a 32,000 gain in U.S. July non-farm payrolls, the smallest increase since last December.

The Fed on Tuesday raised the benchmark federal funds rate -- the charge on overnight loans between banks which influences credit costs throughout the economy -- to 1.5 percent. It was the second quarter-point increase this year, following one announced on June 30 after the last meeting of its Federal Open Market Committee.

The Fed also raised the discount rate, which it charges on infrequent loans to member Fed banks, a quarter-point to 2.5 percent.

Further news affecting mortgage rates will come next week when the Commerce Department releases its report on U.S. July housing starts.