Weekly interest and loan rates | Home values Northwest stock contest 2004 | Consumer affairs

Record low adjustable-rate mortgages at 3.41 percent

By Steve Kerch
CBS MarketWatch

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The national average interest rate on a 30-year, fixed mortgage fell to 5.41 percent from 5.59 percent a week earlier. That was the lowest since July 3, 2003.

The 15-year mortgage was at 4.69 percent, down from 4.88 percent. The one-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 3.41 percent in the week ended yesterday, down from 3.47 percent a week earlier.

That put the ARM at its lowest point since Freddie Mac started tracking the issue in 1984.

The 30-year mortgage and the ARM required the payment of 0.6 of a point to achieve the rate; the 15-year needed 0.7 of a point. A point is one percent of the loan amount, charged as prepaid interest.

"As we had predicted earlier in the month, interest rates for 30-year fixed-rate mortgages edged closer to last year's record low figures," said Frank Nothaft, Freddie Mac chief economist. "For the year as a whole, we expect long-term rates may be even lower annually than they were in 2003."

"Families looking to lower their monthly payments even further might consider adjustable-rate mortgages. We predict ARMs will make up a much larger share of originations this year, perhaps the highest since about 1995."

The rate drop, which has caught housing economists by surprise, is causing some to revise their economic forecasts. Fannie Mae Chief Economist David Berson said he now expects mortgage originations to hit $2.4 trillion in 2004, up from a prediction of $1.9 trillion.

Fannie Mae economists also now say home sales should hit another record this year instead of falling off slightly and they think home prices will rise a stronger-than-previously-anticipated 5.5 percent.

Mortgage rates on June 12, 2003, hit their lowest level since Freddie Mac began keeping records in 1971. The national average 30-year loan bottomed out at 5.21 percent. It spiked as high as 6.44 percent in early September, then gradually eased again.

Mortgage activity edged higher in the week ended March 5 just as interest rates began their tumble.

The Mortgage Bankers Association said its composite index of mortgage loan applications increased 1.2 percent to 889.1 on a seasonally adjusted basis from 878.7 one week earlier.

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