Construction lull pulls down mortgage rates

Mortgage rates declined for the second straight week as the continuing slowdown in home construction helped alleviate inflation concerns, Freddie Mac reported today in its weekly survey.

"Housing starts in October were down more than expected, which the market saw as an indication housing would be a bigger drag on the economy than had previously been thought," said Frank Nothaft, Freddie Mac vice president and chief economist. "Slower growth usually means less inflation and less inflation means lower interest rates. Hence, the drop in mortgage rates this week."

The 30-year fixed-rate mortgage sank this week to an average 6.18 percent, down from 6.24 percent a week ago, approaching lows not seen since late January when the rate averaged 6.12 percent, Freddie Mac said.

The 15-year fixed rate fell from 5.94 percent to 5.91 percent during the period, reaching a near-nine-month low when it averaged 5.89 percent on March 2.

Points, which are fees charged by lenders for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.99 percent this week, with an average 0.6 point, down from last week when it averaged 6.04 percent. The one-year Treasury-indexed ARM averaged 5.49 percent this week with an average 0.6 point, down from 5.53 percent last week.

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