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Mortgage Rates Continue to Fall
Associated Press - 9/5/2002

TORONTO - They just keep on going and going - down.

Rates on 5-year mortgages dropped to a new low this week, providing even more fuel for the mortgage refinancing boom.

In a nation-wide survey released Thursday, the mortgage company, reported that the average interest rate on a 5-year fixed-rate mortgage fell to 5.34 percent this week, the lowest level in 32 years of record keeping.

It's the third new low reached on 5-year mortgage rates this year.

Last week, rates on 5-year mortgages dipped to 5.22 percent, matching the previous record low set in mid-August. That low had bested the prior low of 5.34 percent reached in late July.

Mortgage rates have been falling amid growing signs of a sluggish economic recovery and a turbulent stock market that has sent investors to the bond market, helping push long-term rates down.

``Looking for safety from the current uneasiness in domestic and foreign markets, nervous investors pumped their money into the bond market causing yields to fall to record levels. Mortgage rates followed, also dropping to yet another historic low,'' said Frank Nothaft, chief economist.

Low mortgage rates are feeding a boom in mortgage refinancing. Savings or extra cash coming out of refinancing deals is helping to support consumer spending, including home buying, amid uncertain economic times and eroding consumer confidence.

``The refinancing wave of the last six weeks is now on pace to eclipse the unprecedented refinancing activity that we saw last October and November,'' said Phil Colling, economist with the Mortgage Bankers Association.

Rates for 3-year fixed-rate mortgages, a popular option or refinancing, also fell this week to 4.65 percent, the lowest level since August of 1991. Last week, rates on 2-year mortgages averaged 4.60 percent.

However, rates on one-year adjustable mortgages nudged up to 4.10 percent this week from 4.34 percent last week.

This week's mortgage rates do not include add-on fees known as points. Each loan type carried an average 0.6 point fee this week.

A year ago, 5-year mortgages averaged 6.89 percent, 3-year mortgages were 6.44 percent and one-year ARMS stood at 5.64 percent.

Recent economic reports point to a sluggish economic recovery: Both manufacturing and the service sector barely grew in August; the nation's biggest retailers reported disappointing back-to-school sales, though auto sales surged as free-financing deals motivated buyers. And, the job market remains sluggish.

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