Business

Mortgages plunge below 6 percent

WASHINGTON -- Rising worries about a weak economy pushed rates on 30-year mortgages below the 6 percent mark for only the second time in more than two years.

Freddie Mac, the mortgage company, reported Thursday that 30-year, fixed-rate mortgages averaged 5.87 percent this week.

That was down from 6.07 percent last week and was the lowest level for 30-year mortgages in more than two years. Only once during that time have rates fallen below 6 percent, dipping to 5.96 percent for one week in December.

Analysts attributed this week's decline to Friday's employment report, which showed the jobless rate jumping to 5 percent in December, up from 4.7 percent in November. It was the highest jobless mark in two years and the biggest one-month increase since the 2001 terrorist attacks.

The weak employment picture has heightened fears that the steep slump in housing and a credit crisis that hit in August could be pushing the country into a recession. However, economists believe that further rate cuts by the Federal Reserve and a possible economic stimulus package of tax cuts from the administration could still ward off a full-blown downturn.

Frank Nothaft, chief economist at Freddie Mac, said that because mortgage rates have dropped by more than a quarter-point in the past two weeks, there has been an increase in the number of people refinancing mortgages to more attractive rates, a development that should help spur the economy.

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 this year and perhaps 2009.

Other types of mortgages also showed declines this week.

Rates on 15-year mortgages, a popular choice for refinancing, dropped to 5.43 percent this week, down from 5.68 percent last week. Rates on five-year adjustable-rate mortgages declined to 5.63 percent, compared with 5.78 percent last week. Rates on one-year ARMs fell to 5.37 percent, down from 5.47 percent last week.

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

Thirty-year, 15-year and one-year mortgages carried a nationwide average fee of 0.4 points each. Five-year mortgages had a fee of 0.5 points.

A year ago, 30-year mortgages stood at 6.21 percent, 15-year mortgages were at 5.96 percent, five-year adjustable-rate mortgages averaged 6.03 percent and one-year ARMs were at 5.44 percent.

On the Net: www.freddiemac.com.

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