Rates on 30-year mortgages drop below 6%

Rates on 30-year mortgages dropped below 6% this week for the first time in more than a month, reflecting aggressive efforts by the Federal Reserve to cut interest rates to protect the economy from a serious recession.

Mortgage company Freddie Mac reported that 30-year fixed-rate mortgages averaged 5.87% this week. That was down from 6.13% last week and marked the first time that 30-year rates have fallen below 6% since the week of Feb. 14.

Rates on 30-year mortgages dropped below 6% in the second week of January and stayed there for six straight weeks as the sharp economic slowdown stirred concerns about a possible recession.

In the last month, bond markets had grown worried about rising inflation pressures that are coming at the same time that the economy is slowing.

But the meltdown of Bear Stearns, the nation’s fifth-largest investment bank, over the weekend prompted the Fed to move aggressively to pump money into the financial system and slash a key lending rate by three-fourths of a point Tuesday.

Analysts said all of these Fed efforts had helped ease pressure on interest rates that had been generated by higher inflation readings. And helping in that area, the government reported last week that consumer prices were unchanged in February, a significant moderation from the January readings, although retail sales fell by a larger-than-expected amount in February, reinforcing worries about economic weakness.

“Slowing consumer spending and weak employment conditions are among the concerns behind the Fed’s decision to lower the target federal funds rate,” said Frank Nothaft, chief economist at Freddie Mac.

Other categories of mortgages also showed declines this week.

Rates on 15-year fixed-rate mortgages, a popular choice for refinancing, fell to 5.27% this week, down from 5.60% last week.

For five-year adjustable-rate mortgages, rates slipped to 5.56%, compared with 5.58% last week.

Rates on one-year adjustable-rate mortgages were the only category to show an increase, edging up to 5.15%, compared with 5.14% last week.

The mortgage rates do not include add-on fees known as points. For 30-year and 15-year mortgages, the nationwide average fee was 0.5 of a point. Five-year mortgages carried an average fee of 0.9 of a point and one-year mortgages had a 0.8-of-a-point average.