Mortgage Rates Drop to Lowest Level on Record

Continuing their record-breaking streak, mortgage rates dipped to their lowest levels on record, mortgage company Freddie Mac said Thursday.

For the week ending today, Freddie Mac said 30-year fixed mortgage rates fell to a record average of 5.93% from 6.03%. The 30-year rate has remained below the key 7% level since mid-April and fell to its previous lowest level in the week that ended Nov. 15.

“2002 was an amazing year for the housing sector,” said Frank Nothaft, Freddie Mac’s chief economist, adding that the 30-year rate averaged 6.5% this year, the lowest annual average in more than 31 years.

“The outlook for the future is rosy as we start out the new year with mortgage rates at or below 6% across the nation,” he added.

In spite of these record lows, U.S. mortgage applications fell 7.8% last week but remained at levels above last year’s average, according to the Mortgage Bankers Assn. of America.

Mortgage rates are expected to plateau next year because the Federal Reserve is unlikely to cut its key interest rates further as the economy is showing signs of a recovery, in part fueled by the strong housing market.

Record low rates were “the primary factor that led to an incredible amount of home building, home sales and refinancing, all of which helped keep the economy from another recession,” Nothaft said.

Freddie Mac said rates on 15-year mortgages inched lower to 5.32% from 5.42% a week ago, matching the record low attained in the week ended Nov. 15.

One-year adjustable rate mortgages also fell to an all-time low of 4.01% from 4.07%.

Freddie Mac said lenders charged an average of 0.6% in fees and points on 30- and 15-year mortgages as well as on ARMs, unchanged from last week.

Freddie Mac is a corporation chartered by Congress that buys mortgages from lenders and packages them into securities for investors or holds them in its own portfolio.