Mortgage rates dropped this week as markets bet the Fed would soon pause its interest-rate hikes amid modest economic growth and declining home sales, according to surveys conducted by Freddie Mac and

In Freddie Mac’s survey, the 30-year fixed-rate mortgage fell to an average 6.72 percent this week, down from last week’s average of 6.8 percent. The average for the 15-year fixed-rate mortgage also dipped from last week, falling from 6.41 percent to 6.34 percent.

Points, which are fees charged by lenders for loan processing expressed as a percent of the loan, averaged 0.3 on the 30-year and 0.4 on the 15-year loans.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 6.35 percent this week, with an average 0.4 point, down from last week when it averaged 6.36 percent. The one-year Treasury-indexed ARM averaged 5.78 percent this week, with an average 0.7 point, down from last week when it averaged 5.8 percent.

“Mortgage rates drifted lower this week on indications that economic growth is moderating, inflation remains under control and the Fed just may pause raising rates for awhile,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Meanwhile, recently released new-homes sales for June fell to a lower-than-expected rate. That drop can be traced directly to higher mortgage rates, which are also helping to slow the growth of house prices in 2006.”

In’s survey, mortgage rates dropped thanks to slower economic growth and hints from Fed Chairman Ben Bernanke that interest-rate hikes are nearing an end. The average 30-year fixed-rate mortgage fell to a six-week low of 6.77 percent, and these loans had an average of 0.28 discount and origination points.

The average 15-year fixed-rate mortgage, popular for refinancing, dropped by a similar amount to 6.39 percent, according to On larger loans, the average jumbo 30-year fixed rate is back below the 7 percent mark at 6.95 percent. Adjustable-rate mortgages were no different, with the average 5/1 ARM slumping to 6.47 percent, and the average one-year ARM dipping to 6.1 percent.

The decline in mortgage rates began with Fed Chairman Ben Bernanke’s testimony before the Senate Banking Committee last week and was underscored when the June existing-home sales indicated a widespread slowdown in the housing market, noted. The housing market propped up economic growth in recent years but the fear now is that it will take the wind out of the sails of consumer spending and lead to a broader economic downturn. Yields on government bonds that initially declined due to Bernanke’s comments last week remained low this week as the inventory of unsold homes reached a nine-year high. Mortgage rates are closely related to yields on long-term government bonds. reported that fixed mortgage rates are nearly one full percentage point higher than one year ago. On July 27, 2005, the average 30-year fixed mortgage rate was 5.84 percent, meaning that the monthly payment on a loan of $165,000 was $972. With the average 30-year fixed rate now 6.77 percent, the same loan originated today would carry a payment $100 per month higher, $1,072. Despite recent increases, fixed mortgage rates remain an attractive refinancing alternative for adjustable-rate borrowers facing sharp payment adjustments, according to

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

New York – 6.73 percent with 0.19 point

Los Angeles – 6.8 percent with 0.47 point

Chicago – 6.9 percent with 0.05 point

San Francisco – 6.83 percent with 0.23 point

Philadelphia – 6.67 percent with 0.33 point

Detroit – 6.83 percent with 0.01 point

Boston – 6.82 percent with 0.09 point

Houston – 6.84 percent with 0.35 point

Dallas – 6.74 percent with 0.45 point

Washington, D.C. – 6.58 percent with 0.63 point

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