Sunday, January 09, 2005

Mortgage interest rates begin the new year with a decline


BY JEANNINE AVERSA
Detroit Free Press

Mortgage rates around the country moved lower last week, marking a good start to a new year of home buying.

Freddie Mac's weekly survey of mortgage rates showed that rates on 30-year, fixed rate mortgages averaged 5.77 percent for the week ending Jan. 6. That was down from the previous week's 5.81 percent.

For all of 2004, rates on benchmark 30-year mortgages averaged 5.84 percent, second only to 2003's 5.83 percent, the lowest annual rate on Freddie Mac's records.

Low mortgage rates powered home sales. Analysts believe sales hit a record high for all of 2004. The housing market is expected to post another good year in 2005, analysts said.

"Economic news seems to reflect steady growth and low inflation, placing little upward pressure on interest rates," said Amy Crews Cutts, Freddie Mac's deputy chief economist.

"Although we expect mortgage rates will start to trend gently upward over the year, 30-year, fixed-rate mortgage rates should stay under 6 percent, at least through the first quarter," she said.

Some analysts believe rates on 30-year mortgages could climb to around 6.5 percent by the end of this year. That still would be considered low by historical standards.

Rates on 15-year, fixed-rate mortgages, a popular option for refinancing, dipped last week to 5.21 percent, from 5.23 percent the previous week. For one-year adjustable-rate mortgages, rates fell to 4.10 percent last week, from 4.19 percent.

Freddie Mac added another type of mortgage to the weekly survey it releases each Thursday: the five-year, hybrid adjustable-rate mortgage. It's fixed for five years and then adjusts each year thereafter. The rate on that mortgage averaged 5.03 percent.

Nationwide averages for mortgage rates last week do not include add-on fees known as points. The thirty-year and one-year adjustable mortgages carried 0.7-point fees. Fifteen-year mortgages carried a 0.6-point fee and five-year adjustables carried a 0.5-point fee.