WASHINGTON – Mortgage rates declined slightly this week as investors grew more hopeful that the Federal Reserve's long string of rate hikes is drawing to a close.
Freddie Mac (FRE), the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages dipped to a nationwide average of 6.72 percent, down from 6.80 percent last week, which had been the highest level for rates in more than four years.
The lowest mortgage rates in four decades powered a boom in housing which pushed homes sales to record levels for five consecutive years. But sales of both new and existing homes have slowed this year under the impact of rising interest rates.
The Commerce Department reported Thursday that sales of new homes fell by 3 percent in June, the biggest drop in four months, with the inventory of unsold homes hitting a record high.
Analysts attributed this week's drop in mortgage rates to testimony from Federal Reserve Chairman Ben Bernanke who told Congress last week that the Fed believed a slowing economy would help reduce inflation pressures. Those remarks were seen as a signal that the central bank's long string of rate hikes could be drawing to a close.
"Mortgage rates drifted lower this week on indications that economic growth is moderating, inflation remains under control and the Fed just may pause raising rates for awhile," said Frank Nothaft, chief economist at Freddie Mac.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 6.34 percent this week, down from 6.41 percent last week.
Rates on one-year adjustable rate mortgages dropped to 5.78 percent, compared with 5.80 percent last week.
Rates on five-year adjustable-rate mortgages slipped to 6.35 percent from 6.36 percent last week.
The mortgage rates do not include add-on fees known as points. The 5-year and 15-year mortgages carried a nationwide average fee of 0.4 point. The 30-year mortgage had a nationwide average fee of 0.3 point and the one-year ARM carried a fee of 0.7 point.
A year ago, 30-year mortgages averaged 5.77 percent, 15-year mortgages stood at 5.34 percent, one-year ARMs were at 4.46 percent and five-year ARMs averaged 5.27 percent.