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Mortgage Rates Drop Again, Hitting Lowest Level in Years

May 23, 2003|From Reuters

Average interest rates on U.S. 30- and 15-year mortgages set record lows in the week ending today, mortgage company Freddie Mac said Thursday.

Thirty-year mortgage rates fell to an average of 5.34% -- the lowest on Freddie Mac records dating to 1971 -- from the previous low of 5.45% set last week.

Fifteen-year mortgages dipped to an average of 4.73% -- the lowest on Freddie Mac records going back to 1991 -- from a previous record low average of 4.84% last week.

One-year adjustable-rate mortgages stood at a record low average of 3.61% -- the lowest on Freddie Mac records tracing to 1984 -- from 3.67% the prior week.

A year ago, 30-year mortgages stood at an average of 6.81%, 15-year mortgages at 6.28% and ARMs at 4.85%.

"Long-term bond yields dropped leading up to Federal Reserve Chairman [Alan] Greenspan's testimony to Congress over speculation of what he may say about deflation and over the possibility of the Federal Reserve buying long-term Treasury bonds to fight it," said Frank Nothaft, Freddie Mac chief economist.

"Consequently, interest rates for fixed-rate mortgages and one-year ARMs fell to another record low this week," Nothaft said.

Greenspan on Wednesday told the Joint Economic Committee that the potential danger posed by deflation, a general fall in prices, was small but serious enough to keep the central bank on guard.

Greenspan called deflation "a threat that, even though minor, was sufficiently large that it does require very close scrutiny and -- maybe, maybe -- action on the part of the central bank." He added it was a "very serious issue" that the Fed had been paying "extensive attention" to recently.

Freddie Mac said lenders charged an average of 0.7% in fees and points on 30-year mortgages and ARMs, both up from 0.6% last week. They also charged 0.7% on 15-year mortgages, unchanged from last week.

Freddie Mac is a corporation chartered by Congress that buys mortgages from lenders and packages them into securities for investors or holds them in its own portfolio.

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