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30-year mortgage rates drop sharply to less than 6%

September 12, 2008|From the Associated Press

WASHINGTON — Rates on 30-year mortgages dropped sharply this week, falling to the lowest level in five months, as the government's dramatic takeover of mortgage giants Fannie Mae and Freddie Mac had the hoped-for effect of lowering mortgage rates.

Freddie Mac reported Thursday that its nationwide survey found that 30-year fixed-rate mortgages fell to 5.93% this week, down from 6.35% last week.

The sharp decline pushed the 30-year rate below 6% for the first time since late May and marked the lowest level for this rate since it averaged 5.88% the week of April 17.

Private economists had predicted that the government's move Sunday to take control of Fannie Mae and Freddie Mac would result in lower mortgage rates for consumers because it removed a huge uncertainty about the future of the two firms, which own or guarantee half of the nation's mortgages.

Mark Zandi, chief economist at Moody's, said Thursday that he believed rates could keep falling and perhaps drop to around 5.5% on the 30-year mortgage, which would give an additional boost to the battered housing market.

The 30-year mortgage rate hit a high for this year at 6.63% on July 24 and had been above 6% since late May.

The Freddie Mac survey showed that other mortgage rates declined this week, although one-year rates bucked the downward trend.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, fell to 5.54%, down from 5.90% last week.

Rates on five-year adjustable-rate mortgages averaged 5.87% this week, down from 5.97% last week.

But one-year adjustable-rate mortgages edged up to 5.21%, compared with 5.15% last week.

These rates do not include add-on fees known as points. The nationwide fee for 30-year, 15-year and five-year mortgages averaged 0.7 of a point last week. The nationwide fee for one-year mortgages averaged 0.6 of a point this week.

A year ago, rates on 30-year mortgages stood at 6.31%, 15-year mortgage rates averaged 5.97%, five-year adjustable-rate mortgages were at 6.17% and one-year adjustable-rate mortgages stood at 5.66%.

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