Mortgage rates fell for the second consecutive week as the economy treaded water, according to surveys conducted by mortgage buyer Freddie Mac and Bankrate.

In Freddie Mac’s weekly survey, the 30-year fixed-rate mortgage averaged 5.81 percent for the week ended today, slipping from last week when it averaged 5.85 percent. The average for the 15-year fixed-rate mortgage this week is 5.19 percent, down from last week’s average of 5.24 percent. Points on the 30-year averaged 0.7; points on the 15-year averaged 0.6.

One-year Treasury-indexed adjustable-rate mortgages averaged 4.01 percent this week, with an average 0.6 point, down from last week when it averaged 4.08 percent.

“Mortgage rates eased even further this week in response to a setback in economic growth during June and possibly July,” said Frank Nothaft, Freddie Mac vice president and chief economist. “However, we believe the slowdown to be temporary and we expect growth to pick back up in the second half of this year.

“In the meantime, lower rates have spurred further expansion of home ownership, which was confirmed by the new housing construction figures for July. Thanks in great part to the low mortgage rates we have experienced thus far, 2004 will be another banner year for the housing industry.”

Fixed mortgage rates dropped again this week as a new report quelled fears of accelerating inflation, Bankrate.com reported today. The average 30-year fixed-rate mortgage fell to 5.82 percent, according to Bankrate.com’s weekly national survey of large lenders. The 30-year fixed-rate mortgages in this week’s survey had an average of 0.32 discount and origination points.

The 15-year fixed-rate mortgage popular for refinancing retreated from 5.3 percent to 5.2 percent. The average rate for the jumbo 30-year fixed-rate mortgage dropped from 6.12 percent to 6.06 percent, and the average one-year adjustable-rate mortgage sank from 4.15 percent to 4.09 percent.

The latest decline in mortgage rates is due to the Aug. 17 release of the Consumer Price Index, which showed prices dipping slightly since July. At the core level, excluding food and energy, prices were up a scant 0.1 percent. The tame inflation report calmed the nerves of bond investors – including buyers of mortgage-backed bonds – who bid bond prices higher in response.

Mortgage rates are closely related to yields on long-term government bonds. Mortgage rates have declined by nearly one-half percentage point since the Federal Reserve began boosting short-term interest rates on June 30.

The following is a sampling of Bankrate’s average 30-year-mortgage interest rates this week in some U.S. metropolitan areas.

New York – 5.87 percent with 0.11 point

Los Angeles – 5.87 percent with 0.44 point

Chicago – 5.86 percent with 0.09 point

San Francisco – 5.83 percent with 0.32 point

Philadelphia – 5.82 percent with 0.31 point

Detroit – 5.72 percent with 0.25 point

Boston – 5.96 percent with no points

Houston – 5.74 percent with 0.67 point

Dallas – 5.78 percent with 0.42 point

Washington, D.C. – 5.78 percent with 0.59 point

***

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