30-year rate for mortgages rises slightly, to 5.72 percent

October 03, 2004|By BLOOMBERG NEWS

The average rate on a benchmark 30-year fixed mortgage in the United States rose to 5.72 percent last week from 5.7 percent, according to Freddie Mac.

The one-year adjustable rate fell to 3.97 percent from 4 percent, Freddie Mac said.

The 15-year fixed rate rose to 5.12 percent from 5.1 percent.

Rates on 30-year mortgages hit a high this year of 6.34 percent the week of May 13.

Rates have slowly drifted downward as economic activity cooled in the late spring and early summer and inflation fears receded.

Mortgage rates have remained restrained even as the Federal Reserve again raised a key short-term interest rate. Last month the Fed bumped up the target for its federal funds rate to 1.75 percent, marking the third rate increase since June. The funds rate is the interest that banks charge each other on overnight loans to maintain reserves and is the Fed's main tool for influencing economic activity.

Economists say the Fed needs to slowly raise the funds rate from extraordinarily low levels to more normal levels to protect against the chance that inflation will become a problem.

"Low mortgage rates continue to keep the housing market vibrant," said Frank Nothaft, Freddie Mac's chief economist. He said he expects rates on 30-year, fixed-rate mortgages to remain below 6 percent for the rest of the year.

The nationwide averages for mortgage rates do not include add-on fees known as points. All three mortgage categories carried a 0.6 point fee.

The Associated Press contributed to this article.

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