Average interest rates on 30-year mortgages fell this week to the lowest in more than a year, mortgage finance company Freddie Mac (FRE) said on Thursday.

It said weaker economic data fueled speculation that the Federal Reserve (search) might slow its upward march on short-term borrowing costs to head off inflation. However, Fed chief Alan Greenspan (search), in testimony to Congress on Thursday, signaled further increases in interest rates.

U.S. 30-year mortgage rates eased to an average of 5.56 percent in the week ended June 9 from 5.62 percent a week earlier. It marked the lowest level for 30-year loans since they averaged 5.52 percent in the April 1, 2004, week.

Frank Nothaft, Freddie Mac vice president and chief economist, said despite the recent slide in mortgages, 30-year rates will rise to an average between 5.9 percent and 6.2 percent later this year.

Freddie Mac said 15-year mortgages fell to an average of 5.14 percent from 5.20 percent. One-year adjustable rate mortgages also slipped, to 4.21 percent from 4.26 percent.

Greenspan on Thursday dismissed concerns that a rash of recent economic reports, highlighted by last Friday's weaker-than-expected May employment report, was evidence of an economic slowdown.

"Despite some of the risks that I have highlighted, the economy seems to be on a reasonably firm footing, and underlying inflation remains contained," he said in testimony to the congressional Joint Economic Committee.

The Federal Reserve has raised interest rates eight times since last June to reign in inflationary pressures.

Employers added only 78,000 workers to their payrolls in May, the weakest job growth in 21 months, the Labor Departmentsaid last week. Still, the job market showed some bullish signs as the unemployment rate edged down to 5.1 percent, its lowest since September 2001, from April's 5.2 percent.

"Markets are now speculating whether the Fed will continue raising rates at the same pace that it has been, or will it begin to moderate the frequency of its actions," said Nothaft, referring to the weak jobs report.

Freddie Mac said lenders charged an average of 0.6 percent in fees and points on 30-year mortgages and on the one-year ARM, both unchanged from a week ago. Fifteen-year mortgages had fees and points of 0.5 percent, down from 0.6 percent.

Freddie Mac also said the hybrid "5/1" ARM, set at a fixed rate for five years, then adjustable each year following, fell to 5.01 percent from 5.10 percent.

A year ago, 30-year rates averaged 6.30 percent, 15-year mortgages 5.67 percent and the ARM 4.14 percent.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities to sell to investors or to hold in its own portfolio.