Originally created 09/25/98

Mortgage rates lowest in three decades



WASHINGTON -- Mortgage rates, already at a three-decade low, fell a bit further this week.

The average interest rate on 30-year, fixed-rate mortgages dropped to 6.64 percent from 6.66 percent, Freddie Mac, the mortgage company, said Thursday. It's fallen more than a quarter percentage point over the past four weeks and is down two-thirds of a point from a year ago.

This week's rate marks the lowest since the company began compiling the average in 1971. Separate records kept by the now defunct Federal Home Loan Bank Board show rates haven't been lower in 31 years.

The rate drop is a byproduct of global financial turmoil. Seeking safety, foreigners have been snapping up dollar-denominated investments, driving down U.S. rates.

"Interest rates remain the lowest in Freddie Mac history; indeed, they are the lowest we have seen since 1967," said Freddie Mac economist Frank Nothaft.

He said the low rates probably kept existing home sales at a high level -- at a 4.8 million to 4.9 million annual rate -- through September.

They're also fueling a refinancing boom. The Mortgage Bankers Association of America said loan applications last week were 94 percent higher than a year ago. And refinancing represented 59 percent of the applications.

"A third of the mortgage market will turn over this year. That's incredible," said economist Mark Zandi of Regional Financial Associates of West Chester, Pa.

Homeowners with a $100,000, 30-year mortgage, at 7.5 percent can save $800 a year by refinancing to a 6.5 percent rate.

Fifteen-year mortgages, a popular option for refinancing, averaged 6.32 percent this week, down from 6.35 percent and the lowest since October 1993, Freddie Mac said.

On one-year adjustable-rate mortgages, lenders were asking an average initial rate of 5.42 percent, down from 5.43 percent and the lowest since March 1996.

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