Mortgage rates stay above 6% for second consecutive week

Freddie Mac report notes rise in yields for long-term debt

October 26, 2003|By BLOOMBERG NEWS

The average 30-year fixed mortgage rate held above 6 percent nationally for a second straight week, Freddie Mac said, reflecting the rise in market yields on long-term debt.

The 30-year rate for the week ending Friday averaged 6.05 percent, the same as a week earlier, according to Freddie Mac, the No. 2 purchaser of U.S. mortgages. The average rate on a 15-year mortgage rose to 5.39 percent from 5.36 percent, and the average one-year adjustable-rate mortgage slipped to 3.76 percent from 3.79 percent.

The 30-year mortgage rate had climbed in recent weeks amid signs of faster economic growth, which may boost inflation and create greater demand for credit. Economists said rates are still low enough to support housing demand.

"The market is probably going to slow down next year, but there's reason for optimism," said Michael Moran, chief economist at Daiwa Securities America Inc., in a presentation at a National Association of Home Builders conference in Washington last week. "Mortgage rates are still below the levels of the last few years."

Last year at this time, the average 30-year rate was 6.31 percent, Freddie Mac said. The rate averaged 5.67 percent in the first half of this year and fell to a record low of 5.21 percent in June.

The rise in interest rates has slowed refinancing, a source of cash for consumers the past several quarters. The Mortgage Bankers Association in Washington said last week that its index of applications to refinance mortgages fell last week to the lowest since the end of August.

Economists expect home sales to slow next year as faster economic growth pushes interest rates higher. At the same time, some said a rebound in the labor market will underpin demand.

The National Association of Homebuilders increased its forecast last week for new home sales for this year through 2005. New home sales will rise to 1.065 million this year from 977,000 in 2002, the group said at its semiannual forecast conference. The association had previously forecast 1.055 million for this year. Sales next year are forecast at 994,000, up from the 980,000 estimate of Oct. 8.

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