Friday, June 19, 1998

Average mortgage rates fall below 7 percent

WASHINGTON (AP) -- The average rate on 30-year fixed-rate mortgages fell for the fifth consecutive week, dropping to a level -- below 7 percent -- that helped spur a boomlet in home sales and mortgage refinancing early this year.

The rate averaged 6.94 percent this week, down from 7.04 percent the previous week, Freddie Mac, the mortgage company, said Thursday. That's the lowest level since the average hit a four-year low of 6.89 percent in mid-January.

This week's decline was the sharpest in six months and brought the average more than a quarter point below the 5-1/2-month high of 7.22 percent reached at the end of April.

Mortgage rates have followed the drop in yields on U.S. Treasury securities. Treasury yields have fallen because a new round of turmoil in Asia, spilling into U.S. stock markets, has prompted both domestic and overseas investors to seek the relative safety of government-guaranteed bonds.

Though the Asian crisis has pinched the American economy by curbing export sales, it's spurred it by stimulating purchases of homes and big-ticket goods with lower interest rates.

Mortgage applications last week were 69 percent higher than a year ago, the Mortgage Bankers Association of America said. Refinancings represented 42 percent of applications.

Economists said rates could hover around current levels for several months, but they don't expect them to get much lower, barring a serious further deterioration in Asia. The most recent mortgage-rate declines should help keep the housing boom going.

"It may mean the slowdown we're expecting in housing activity during the second half of the year will be milder than we thought, or perhaps nonexistent," said economist Michael Carliner of the National Association of Home Builders.

The average rate on 15-year mortgages, a popular option for refinancing, fell to a four-month low of 6.62 percent this week, down from 6.71 percent the previous week. They had hit a six-month high of 6.85 percent at the end of April.

On one-year, adjustable-rate mortgages, lenders were asking an average initial rate of 5.68 percent, down from 5.71 percent.

The rates do not include add-on fees known as points.