Key 30-year mortgage rate falls again, to 5.81%

National average is lowest since 2nd week in April

other rates also decline

August 20, 2004|By Emily Bregel | Emily Bregel,SUN STAFF

The average rate on the benchmark 30-year fixed mortgage fell to 5.81 percent this week, the lowest rate in four months, Freddie Mac said yesterday.

It was the third straight week that the 30-year rate averaged less than 6 percent, and it was the lowest rate since the second week of April. The rate was 5.85 percent a week ago.

The rate was slightly higher in the Baltimore area, averaging 5.99 percent, said HSH Associates, a company in Pompton Plains, N.J., that studies mortgage markets.

Borrowing costs for housing have declined as the economy slowed from April though June and after recent data showed few signs of employment growth in July. The decline in rates has been welcome news to prospective homebuyers because many economists predict that borrowing costs will rise by the end of the year.

"Suddenly, we get some negative economic news and the [Federal Reserve] may not be so eager to tighten credit," said Bob Kaestner, vice president for consumer real estate at the Bank of America and a spokesman for the Maryland Mortgage Bankers Association.

One-year adjustable rate mortgages (ARMs) fell to 4.01 percent this week, the lowest in two months, from 4.08 percent, said Freddie Mac, the second-biggest purchaser of U.S. mortgages.

The average 15-year, fixed-rate mortgage, which is often used in refinancing, fell to 5.19 percent from 5.24 percent. In metropolitan Baltimore, 15-year rates averaged 5.36 percent and one-year ARMs averaged 4.54 percent, according to HSH.

"Thanks in part to the low mortgage rates we have experienced thus far, 2004 will be another banner year for the housing industry," predicted Frank E. Nothaft, chief economist at Freddie Mac.

Maryland residents have experienced a stable economy and better job prospects than much of the nation. That and extraordinarily low mortgage rates have pushed sales and price appreciation to records in each of the past three years.

Housing sales in Baltimore and its five surrounding counties were 12 percent higher through July compared with the first seven months of 2003, according to Metropolitan Regional Information Systems Inc.

The median sales price of an existing single-family home in the Baltimore area rose 23 percent to $251,700 in the second quarter, compared with the corresponding quarter last year, according to the National Association of Realtors. That appreciation rate tied Washington for the 15th-fastest in the nation in a survey of 129 metropolitan areas.

"We're our own little island over here," said Cindy Ariosa, president of the Greater Baltimore Board of Realtors. "I think because of the [economic] diversity that the Baltimore and Washington area experiences, we may not have this downtrend that the rest of the nation has. Unfortunately, we are reaping the benefits of the downfalls of the economy in the other parts of the country."

At the current 30-year fixed rate nationally, borrowing costs for a $100,000 mortgage would be $587 a month, compared with $615 last year at this time, when the rate was 6.24 percent.

Most experts believe the decline in average mortgage rates won't continue as the national economy improves. "I do think on a whole the interest rates will begin to climb [again]," Ariosa predicted. "This ... may just be a unique situation right now."

Bloomberg News contributed to this article.

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