Mortgage rates dip amid growing sense that Fed will wait to boost interest rates

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Posted 1:48PM on Thursday, April 18, 2002

WASHINGTON - Mortgage rates around the country edged down this week amid growing odds the Federal Reserve will hold off on boosting short-term interest rates. Rates on 30-year mortgages remained below the 7 percent mark for the second week in a row. Freddie Mac, the mortgage company, reported that the average interest rate on 30-year fixed-rate mortgages dipped to 6.94 percent this week, down from 6.99 the previous week, according to a nationwide survey released Thursday. A year ago this time, 30-year mortgages averaged 7.14 percent. Rates on 30-year mortgages hit a low of 6.45 percent in early November, their lowest point since Freddie Mac began conducting its nationwide survey in 1971. Even though rates have moved higher since that time, analysts believe that mortgage rates will be fairly stable this year and will continue to support the housing market. Some economists predict that 30-year rates will go as high as 7.5 percent by the end of this year. That would prevent some people from buying a home, but for many it would would still be affordable, analysts said. Fifteen-year mortgages, a popular option for refinancing, slipped to to 6.42 percent, down from 6.49 percent the week before. A year ago, 15-year mortgages averaged 6.66 percent. On one-year adjustable-rate mortgages, lenders were asking an average initial rate of 4.95 percent, compared with 5 percent the previous week. Last year this time, one-year ARMs averaged 6.08 percent. These rates do not include add-on fees known as points, which averaged around 0.7 percent of the loan amount for all three types of mortgages last week. Though the economy is on the road to recovery from recession, there are some potential potholes. Given that, Federal Reserve Chairman Alan Greenspan, in a Capitol Hill appearance Wednesday, indicated that policy-makers are in no rush to boost short-term rates, which are at 40-year lows. Some believe rates will remain unchanged into the summer. "This should keep mortgage rates low and affordable," said Frank Nothaft, Freddie Mac's chief economist.