The average 30-year fixed mortgage rate fell to 5.66 percent last week as the Federal Reserve signaled it isn't likely soon to raise its benchmark lending target, Freddie Mac said. Other rates also declined.
The 30-year rate for the week ending Friday compares with 5.72 percent the previous week and is down from 5.86 percent a year ago, according to the No. 2 purchaser of U.S. mortgages. Mortgage rates move with yields on government securities such as the 10-year Treasury note, for which yields have fallen on signs that inflation will remain low.
Federal Reserve Chairman Alan Greenspan said in congressional testimony Wednesday that low inflation will allow the central bank to remain "patient" before raising its overnight lending rate from 1 percent, the lowest since 1958. Freddie Mac said it expects rising employment and low borrowing costs to fuel record home sales this year.
"Greenspan led the markets to believe that the Fed's actions would be on hold until there was more than sufficient growth in the economy to warrant a change in monetary policy," said Frank Nothaft, Freddie Mac's chief economist, in a statement. "We expect housing will continue to contribute significantly to consumer spending, which is the largest element of the national economy."
The average 15-year fixed mortgage rate slipped to 4.96 percent last week from 5.03 percent, Freddie Mac reported. The one-year adjustable mortgage rate declined to 3.57 percent from 3.61 percent.
The 30-year fixed rate last week is less than a half percentage point higher than the record low of 5.21 percent reached in mid-June. At the current rate, the monthly principal and interest payment on a $100,000 mortgage would be $577.87, compared with $590.58 a year ago.
"The picture has brightened," Greenspan told the House Banking and Financial Services Committee.