Rates on 30-year mortgages rise for second consecutive week

By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) -Freddie Mac, the mortgage company, reported that 30-year, fixed-rate mortgages averaged 6.42 percent last week, up from 6.34 percent the week before.

Two weeks ago, the nationwide average for 30-year mortgages had dipped to 6.31 percent, the lowest level since May 17. That decline reflected a flight to safety after the turbulence in credit markets, which had increased demand for Treasury securities. Those securities heavily influence mortgage rates.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, averaged 6.09 percent last week, up from 5.98 percent the previous week.

While rates on 30-year and 15-year mortgages rose last week, rates on five-year adjustable-rate mortgages and one-year ARMs declined for a fourth straight week.

The Federal Reserve, which influences short-term rates, announced two weeks ago that it was cutting a key rate by a more-than-expected half point in an effort to make sure that a steep slump in housing and financial market turbulence don't push the economy into a recession.

The Commerce Department reported last week that sales of new homes fell by 8.3 percent in August to a seasonally adjusted annual rate of 795,000 units, the slowest level in seven years.

Sales of existing homes were also down in August, dropping 4.3 percent to an annual rate of 5.5 million units, the slowest pace in five years. It marked the sixth straight month that sales of existing homes have declined as the housing market continues to suffer through its steepest downturn in 16 years.

The share of the market for adjustable-rate loans continues to decline, hitting its lowest level since March 2003, according to the Mortgage Bankers Association. Borrowers facing the prospect of having their initial low "teaser" ARM loans reset to sharply higher rates are trying to avert that payment shock by refinancing into fixed-rate loans.

Rates on five-year adjustable rate mortgages averaged 6.15 percent, down from 6.21 percent the previous week. One-year ARMs averaged 5.60 percent, down from 5.65 percent. It marked the fourth straight weekly decline for both adjustable-rate categories.

The mortgage rates do not include add-on fees known as points. Thirty-year mortgages, 15-year and five-year mortgages all carried a nationwide average fee of 0.5 point while one-year adjustable-rate mortgages had an average fee of 0.6 point.

A year ago, 30-year mortgages stood at 6.31 percent, 15-year mortgages were at 5.98 percent, five-year ARMS averaged 6.00 percent and one-year ARMs were at 5.47 percent.

___

On the Net:

Freddie Mac: http://www.freddiemac.com