Mortgage rate average drops to 6%

Fixed 30-year loan lowest since April

July 18, 2004|By BLOOMBERG NEWS

The average rate on a 30-year fixed mortgage in the United States fell to 6 percent last week, the fourth straight drop and the lowest in almost three months, according to Freddie Mac, the second-biggest buyer of home loans.

The rate decreased from 6.01 percent the previous week and was the lowest since the week that ended April 23, according to McLean, Va.-based Freddie Mac. The rate has dropped from an eight-month high of 6.34 percent in the second week of May.

Mortgage rates move with yields on U.S. Treasury notes, which have fallen in the past few weeks after economic reports suggesting growth slowed in June. Lower borrowing costs prompted the Mortgage Bankers Association yesterday to raise its 2004 forecast for existing-home sales to a record.

"There are few compelling reasons why mortgage rates should dramatically increase right now," said Frank Nothaft, Freddie Mac's chief economist. Demand for housing is at a "healthy pace," he said.

The one-year adjustable rate fell to 4.02 percent from 4.05 percent. The 15-year fixed rate declined to 5.4 percent, the lowest since April 30, from 5.42 percent.

At the current 30-year fixed mortgage rate, the monthly payment on a $100,000 loan would be $599.55, compared with $621.58 on May 14.

A report from the Labor Department last week showed wholesale prices excluding food and energy were up 1.8 percent from June of last year, the biggest 12-month increase since January 2001.

"With cost pressures continuing to build, firms will continue to look for ways to recoup those increases and that could lead to higher inflation," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa.

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