30-year mortgages hit new low in 32 years of tracking

Rates for 30-year mortgages dipped to a new low this week,providing even more fuel for the mortgage refinancing boom.

In a nationwide survey released Thursday, Freddie Mac, themortgage company, reported that the average interest rate on a 30-year fixed-rate mortgage dropped to 6.22 percent, the lowest level in32 years of record keeping. A year ago, 30-year mortgages averaged6.92 percent.

This week's rate surpassed the previous low of 6.31 percent setlast week. And last week's rate had bested the prior low of 6.34percent reached in late July.

Low mortgage rates are feeding a boom in mortgage refinancing.Savings or extra cash coming out of refinancing deals are helping tosupport consumer spending and offsetting some potentially negativefactors, such as the volatile stock market and eroding consumerconfidence, economists said.

Refinancing activity last week represented 68.8 percent ofmortgage loan applications, up from 68.4 percent the previous week,the Mortgage Bankers Association of America reported.

The average interest rate on 15-year mortgages, a popular optionfor refinancing, fell to 5.63 percent this week, the lowest levelsince Freddie Mac began tracking these rates in August 1991. Thatcompared with last week's rate of 5.69 percent. A year ago, 15-yearmortgages averaged 6.48 percent.

On one-year adjustable-rate mortgages, lenders were asking anaverage initial rate of 4.39 percent, up slightly from 4.37 percentthe previous week. Last year this time, one-year ARMs averaged 5.71percent.

These rates do not include add-on fees known as points. Thirty-year mortgages and one-year ARMs each carried an average 0.6 pointthis week, while 15-year mortgages carried an average 0.5 point.

Mortgage rates have been falling amid growing signs of a sluggisheconomic recovery and a roller-coaster stock market that has sentinvestors to the bond market, helping to push long-term rates down.

The economy grew by a pace of just 1.1 percent in the secondquarter of this year, down from a brisk 5 percent pace in the firstquarter. And key economic reports suggest that the second half ofthis year got off to a disappointing start.

Against this backdrop, the Federal Reserve on Tuesday decided tohold short-term interest rates steady, but opened the door to futurereductions.

"The Fed's acknowledgment of weakness in the economy and a flightto quality in the bond market caused fixed-rate mortgages to slidefurther," said Freddie Mac's chief economist, Frank Nothaft.

A separate report today showed that an index of homebuilderexpectations fell in August to the lowest level this year, a signthat the record pace of new home sales may not be sustainable. TheNational Association of Home Builders' housing market index declinedto 57 from 61 in July.