Mortgage Rates Continue to Fall

Mortgage rates dropped for a third straight week, reflecting the impact the weakening economy is having on financial markets.

Freddie Mac, the mortgage-finance giant, reported Thursday that rates on 30-year, fixed-rate mortgages averaged 6.04 percent this week, down from 6.14 percent last week. Rates have sharply declined since hitting a recent high of 6.46 percent during the week of Oct. 16.

Concerns about the economy and worries over the fate of Detroit's three automakers have caused Wall Street's major stock indexes to fall to levels not seen since 2003, convincing investors to put their money in government debt.

Bond yields, which move in the opposite direction from prices, have continued to fall in recent weeks, suggesting that investors still prefer the relative security of government-backed debt.

Yields on debt issued by Freddie Mac and sibling company Fannie Mae are closely tied to mortgage rates. While the companies' bonds do not carry an explicit government guarantee, they are still seen as a relatively safe investment, particularly since the two mortgage-finance companies have been operating under government control since early September.

Thirty-year mortgage rates hit a high for the year of 6.63 percent in late July and then dropped to a seven-month low of 5.78 percent for the week ended Sept. 18, shortly after the government took control of Freddie Mac and Fannie Mae.

Rates on other types of mortgages also fell this week. For 15-year, fixed-rate mortgages, rates dropped to 5.73 percent, from 5.81 percent last week.

Rates on five-year, adjustable-rate mortgages fell to 5.87 percent, from 5.98 percent last week. Rates on one-year, adjustable-rate mortgages edged down to 5.29 percent, from 5.33 percent last week.

The mortgage rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.7 point last week. The fee on five-year, adjustable-rate mortgages averaged 0.6 point, while the fee on one-year adjustable-rate mortgages averaged 0.5 point.

A year ago the nationwide average rate on 30-year mortgages stood at 6.20 percent; 15-year mortgage rates averaged 5.83 percent; five-year, adjustable-rate mortgages were at 5.88 percent; and one-year, adjustable-rate mortgages stood at 5.42 percent.

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