WASHINGTON – Mortgage rates fell this week as a weaker-than-expected employment report eased concerns about inflation.
Freddie Mac (FRE), the mortgage company, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.62 percent, down from 6.67 percent last week, which had been the highest level in nearly four years.
It marked only the second rate decline in the past 11 weeks and still left the 30-year mortgage more than a percentage point above where it was a year ago.
The housing sector, which has enjoyed five boom years, is exhibiting numerous signs of slowing under the impact of rising mortgage rates. Analysts are predicting that sales will decline by around 10 percent this year and price gains will slow.
Frank Nothaft, chief economist at Freddie Mac, said that this week's decline in rates reflected last Friday's report that the economy created just 75,000 jobs last month, the slowest increase in seven months and a sign that the economy has started to slow.
While Federal Reserve Chairman Ben Bernanke jolted markets on Monday by indicating that inflation was still a major concern at the Fed, Nothaft said interest rate increases should remain modest if upcoming readings on inflation are not worrisome.
"The slight drop in long-term rates reflects a cautiously optimistic outlook in the market that core inflation remains contained," he said.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing a home mortgage, fell this week to 6.23 percent, down from 6.26 percent last week.
Rates on one-year adjustable rate mortgages were also down for the week, falling to 5.63 percent. They had been 5.68 percent last week, the highest level since one-year ARMs averaged 5.71 percent in mid-August 2001.
Rates on five-year adjustable-rate mortgages also fell, dropping to 6.20 percent compared to 6.26 percent last week.
The mortgage rates do not include add-on fees known as points. The 30-year, 15-year and five-year mortgages each carried a nationwide average fee of 0.5 point. The one-year ARM had an average fee of 0.8 point.
A year ago, 30-year mortgages averaged 5.56 percent, 15-year mortgages stood at 5.14 percent, one-year ARMs were at 4.21 percent and five-year ARMs averaged 5.01 percent.