Mortgage rates remain low

McLean Va.- The average rate for a 30-year fixed-rate mortgage was 5.75% for 2005's first nine months packaged with an average 0.6 points reports Freddie Mac the U.S.

Congress-chartered corporation that buys mortgages from lenders and repackages them into investor-purchased securities. The average rate in both 2004 and 2003 was 5.8% coupled with 0.6 points. The high point for a 30-year fixed rate mortgage or FRM was 1981's 16.63% and the June 2003 rate of 5.23% is the all-time low since Freddie Mac began its weekly survey.

The 1981 rate was coupled with 2.1 points while the June 2003 rate required 0.6 points. The low point for 2004 was 5.45% reported in March combined with 0.7 points; 2004's highest rate was the 6.29% reported for June paired with 0.6 points. For the week ended Oct. 6 the 30-year FRM averaged 5.98% up from the prior week's 5.91%. A year ago the rate was 5.82%. This is the highest the 30-year FRM has been since March 31 when it averaged 6.04%. Freddie Mac also reported that 15-year fixed rate mortgage rates and 1-year adjustable-rate mortgage rates have inched up in recent weeks.

The latest weekly rate for Oct. 6 for a 15-year mortgage was 5.54% compared with 5.48% for the previous week. The latest weekly 1-year adjustable rate was 4.77% measured against 4.68% for the week ended Sept. 29. "Mortgage rates have been rising for the last four weeks on inflation jitters caused in part by extended high energy costs " said Frank Nothaft Freddie Mac vice president and chief economist. "Still we need more concrete data to predict the direction of the national economy including mortgage rates. "That said we do think that the economy will continue to grow albeit at perhaps a slightly slower pace than in the recent past. Mortgage rates will most likely continue to rise with expansion of the economy " he said. Over the next decade Freddie Mac estimates more than 50 million families will take on new mortgages. Since the stockholder-owned corporation was chartered in 1970 Freddie Mac has financed homes for nearly 30 million families equal to one of every six homes in the United States.

Since April 1971 Freddie Mac has surveyed lenders across the nation weekly to determine the average 30-year FRM. In 1984 the 1-year adjustable-rate mortgage was added to the survey and the 15-year FRM was included beginning in 1991. Currently 125 lenders representing commercial banks thrifts and mortgage-lending companies are surveyed each week. Their responses are weighted by Freddie Mac in proportion to the level of mortgage business that each commands nationwide.

Understanding Adjustable

Understanding Adjustable Rate Mortgages With a fixed-rate mortgage the interest rate stays the same during the life of the loan. But with an Adjustable Rate Mortgage (ARM) the interest rate changes periodically in relation to a certain economic index and payments can go up or down accordingly. Lenders generally charge lower initial interest rates for ARMs than for fixed-rate mortgages .

This makes the ARM easier on your pocketbook at first than a fixed-rate mortgage for the same amount. It also means that you might qualify for a larger loan because lenders sometimes make this decision on the basis of your current income and the first year's payments. If interest rates remain steady or move lower your ARM could be less expensive over a long period than a fixed rate mortgage.

Over against these advantages you must weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It is a trade-off. You get a lower rate with an ARM in exchange for assuming more risk. (For more information about all aspects of mortgage finance call Ned Welsh and his team at Washington Mutual. He can be reached at 389-4000. The office is at 1917 Daily Drive in Camarillo.)

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