Rates Drop Across the Board

Mortgage rates fell this week, with the average interest rate on a 30-year loan dropping to its lowest level in six weeks, as investors became less worried that the Federal Reserve would soon tighten credit policy to stall inflation.

Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.26 percent, down from 6.37 percent last week. It was only the second weekly decline in the past nine weeks.

Analysts attributed the decline in part to comments made this week by Federal Reserve Chairman Ben S. Bernanke. He indicated in his midyear economic report to Congress that the central bank was poised between concerns about rising inflation pressures and the weakening economy.

Many analysts viewed Bernanke's comments as a signal that the central bank will delay tightening rates to give the fragile economy and banking system time to recover. The Fed is hoping that the sluggish economy will help dampen inflation on its own.

"Mortgage rates fell this week amid market speculation that the Federal Reserve may not raise the overnight bank lending rate this year after all," said Frank E. Nothaft, chief economist for Freddie Mac.

Other rates dropped, too, according to Freddie Mac's nationwide survey.

Fifteen-year, fixed-rate mortgages, a popular option for refinancing, dipped to 5.78 percent from 5.91 percent.

Five-year, adjustable-rate mortgages fell to 5.80 percent from 5.82 percent, while the average rate on one-year ARMs dropped to 5.10 percent from 5.17 percent.

The mortgage rates do not include add-on fees known as points. The nationwide average fee for 30-year, 15-year, five-year and one-year mortgages was 0.6 point this week.

A year ago, 30-year mortgages stood at 6.73 percent, 15-year mortgage rates averaged 6.38 percent, five-year adjustables were at 6.35 percent and one-year ARMs averaged 5.72 percent.

Home foreclosures have hit record highs as sagging home values have left many borrowers owing more on their mortgages than their homes are worth. With more empty homes being dumped on an already glutted market, prices are being pulled lower. Buyers, meanwhile, have become harder to find as credit has gotten harder to secure.