Mortgage rates dip, remain above record lows

Mortgage rates dip, remain above record lows

WASHINGTON (AP) – May 22, 2009 – Rates on 30-year mortgages inched downward this week, remaining below 5 percent for the tenth-consecutive week and just above record lows.

Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dipped slightly to 4.82 percent this week, down from an average of 4.86 percent last week.

The all-time low of 4.78 percent was recorded on the weeks of April 2 and April 30. Freddie Mac’s survey dates back to 1971.

Low rates have sparked a surge in refinancing activity. The Mortgage Bankers Association said Wednesday its index of application volume climbed 2.3 percent last week from a week earlier. Applications to refinance existing loans made up nearly 75 percent of all applications.

To revive the economy, mired in the worst slump in decades, the Federal Reserve has cut its key interest rate to a record low near zero and is expected to hold it there well into next year. The Fed also has turned to unconventional tools to lower interest long-term rates and spur spending, which would help bolster economic activity.

The Fed at its meeting in March launched a bold $1.2 trillion economic-revival effort. It agreed to starting buying up to $300 billion worth of government debt over the next six months and to boost purchases of mortgage securities and debt from Fannie Mae and Freddie Mac.

At the April meeting, some Fed policymakers said additional purchases “might well be warranted at some point to spur a more rapid pace of recovery,” according to documents released Wednesday.

Qualifying for a loan, however, is still tough. Lenders have tightened their standards dramatically over the past year, so the best rates are available to those with solid credit.

Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.

The average rate on a 15-year fixed-rate mortgage fell to 4.5 percent this week from 4.52 percent last week, according to Freddie Mac.

Rates on five-year, adjustable-rate mortgages dropped to 4.79 percent from 4.82 percent last week. Rates on one-year, adjustable-rate mortgages rose to 4.82 percent up from 4.71 percent.

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

Copyright © 2009 The Associated Press, Alan Zibel, AP Real Estate Writer.