Rates on 30-year mortgages drop to lowest level in 4 weeks

WASHINGTON — Rates on 30-year mortgages fell last week to the lowest level in a month as investors found new reasons to worry about a possible recession.

Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 6.07 percent this week.

That was down from 6.17 percent last week and was the lowest level for 30-year mortgages since the week of Dec. 6 when they fell to a two-year low of 5.96 percent. That marked the only time that the 30-year mortgage was below 6 percent last year.

Analysts attributed the decline in part to some weaker-than-expected economic reports. The Institute for Supply Management reported that its closely watched gauge of manufacturing activity dipped to the lowest level in nearly five years.

Frank Nothaft, chief economist at Freddie Mac, said that the fall in the manufacturing index could possibly be a "harbinger of a more substantial economic slowdown" at the start of this year. Already, forecasters believe economic growth will slip to a barely discernible annual rate of around 1.5 percent this winter and early spring as the economy feels the impact of the severe slump in housing and a credit squeeze that hit last August.

Housing, which had enjoyed a five-year boom of soaring prices and record sales, has been in a severe slump which economists predicted will continue into 2008.

Nothaft said he predicted that sales of both new and existing homes will be around 5.09 million this year, down by more than 11 percent from 2007.

"Our latest forecast has total home sales continuing to decline in the first quarter of the year before starting a slow recovery," Nothaft said.

Other types of mortgage rates also experienced declines this week, according to the Freddie Mac survey.

Rates on 15-year mortgages, a popular choice for refinancing, dropped to 5.68 percent this week, down from 5.79 percent last week. Rates on five-year adjustable-rate mortgages declined to 5.78 percent, compared to 5.90 percent last week. Rates on one-year ARMs fell to 5.47 percent, down from 5.53 percent last week.

Harder-to-get credit has made it more difficult for some would-be home buyers to secure financing for home and other big-ticket purchases. The more restrictive credit situation has deepened the housing slump.

The mortgage rates do not include add-on fees known as points. Thirty-year, five-year and one-year mortgages each carried a nationwide average fee of 0.5 point. Fifteen-year mortgages had a fee of 0.6 point.

A year ago, 30-year mortgages stood at 6.18 percent. Rates on 15-year mortgages were at 5.94 percent while five-year adjustable-rate mortgages averaged 6.02 percent and one-year ARMs were at 5.42 percent.

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On the Net:

Freddie Mac: www.freddiemac.com