Long-term mortgage rates came down this week on news that home sales and prices fell to lows not seen in several years, according to surveys conducted by Freddie Mac and Bankrate.com.

In Freddie Mac’s survey, the 30-year fixed-rate mortgage dropped to an average 6.37 percent from 6.42 percent last week, while the average 15-year fixed rate sank to 6.03 percent from 6.09 percent. Points, which are fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.

Adjustable-rate mortgages (ARMs) slipped for the second straight week in the surveys, with the five-year Treasury-indexed hybrid ARM down to an average 6.11 percent from 6.15 percent a week ago and the average one-year Treasury-indexed ARM falling to 5.58 percent from 5.6 percent. Points on the five-year and one-year loans averaged 0.5 and 0.6, respectively.

“Mortgage rates eased slightly this week following three weeks of increases. The initial effects of the credit market turmoil that began in August are starting to emerge in housing statistics,” Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. “New-home sales in August fell to the slowest pace in more than seven years and the median sales price had the largest 12-month decline since 1970. Moreover, August’s pending existing-home sales fell to the lowest level on record, which begins in 2001.”

Nothaft added that “prior to August, the housing sector had already lost 260,000 jobs over the 12-month period ending July 2007 while the overall economy had a net gain of 1.8 million new nonfarm payroll employees. In addition, the housing market (through consumption and investment) shed about a percentage point off of GDP growth for the 12-month period ending June 2007.”

In Bankrate.com’s survey, fixed mortgage rates declined this week, with the average conforming 30-year fixed mortgage rate falling to 6.42 percent. Discount and origination points on these loans averaged 0.36.

The average 15-year fixed-rate mortgage popular for refinancing fell by a similar amount to 6.1 percent, Bankrate.com reported. The average jumbo 30-year fixed rate pulled back to 7.28 percent, and adjustable mortgage rates were lower as well, with the average one-year ARM slipping to 6.13 percent and the average 5/1 ARM sliding to 6.26 percent.

According to Bankrate.com, another drop in pending home sales added to mounting housing concerns and helped pull mortgage rates lower. Worries about the economic fallout from housing enticed investors into the safety and security of long-term government bonds, which pushed bond prices higher and therefore lowered yields. Fixed mortgage rates are closely related to yields on 10-year Treasury notes.

The path of mortgage rates in the next week is very likely to hinge on the outcome of the employment report to be released Oct. 5, Bankrate.com reported. If job growth does not appear as bad as initially thought, this could give the Federal Open Market Committee latitude to pause at the next meeting. But more troubling signs from the job market might compel the Fed to cut interest rates again at its Oct. 30-31 meeting.

Looking back three months ago, the average 30-year fixed mortgage rate was 6.74 percent, meaning that a $200,000 loan would have carried a monthly payment of $1,296. Now that the average conforming 30-year fixed rate is 6.42 percent, the same $200,000 loan carries a monthly payment of $1,254.

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

New York – 6.47 percent with 0.19 point

Los Angeles – 6.49 percent with 0.64 point

Chicago – 6.38 percent with 0.15 point

San Francisco – 6.39 percent with 0.7 point

Philadelphia – 6.49 percent with 0.13 point

Detroit – 6.39 percent with 0.01 point

Boston – 6.49 percent with 0.04 point

Houston – 6.37 percent with 0.65 point

Dallas – 6.36 percent with 0.5 point

Washington, D.C. – 6.34 percent with 0.55 point

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