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To: ms.smartest.person who wrote (1846)	10/11/2002 1:09:22 PM
From: ms.smartest.person	Read Replies (1) \| Respond to of 5140

Mortgage rates set another record low By Holden Lewis • Bankrate.com® Record low mortgage rates are becoming a habit. The benchmark 30-year fixed-rate mortgage fell 4 basis points to 6.02 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.49 discount and origination points. In six of the last 12 weeks, the rate on the 30-year mortgage has set a modern low. The last time rates were lower than this was in May 1966, when rates on 30-year FHA mortgages were 6 percent. Bankrate has surveyed mortgage rates weekly since 1985; Wednesday's 6.02 rate is the lowest ever in our survey. In the last few weeks, mortgage rates dropped along with yields on Treasury notes. Stock prices have fallen as well. All are happening in reaction to poor economic news. Investors worry that profits will decline at corporations such as General Electric and General Motors. The lockout on West Coast docks, though now on hold, could stunt the availability of toys and other items this holiday shopping season. Some Wall Street firms are considering layoffs. Now some analysts are downgrading their economic forecasts for the rest of the year. Among them is Frank Nothaft, chief economist for Freddie Mac, the company that buys and sells mortgages on the secondary market. "Lousy stock market performance has continued to erode household wealth, and recent manufacturing data point toward weak factory orders and continued plant overcapacity," Nothaft says. "Thus, fourth quarter economic growth is likely to be weaker, raising the possibility of another Federal Reserve rate cut." Low interest rates, Nothaft adds, will stay with us for a while. Phil Colling, an economist with the Mortgage Bankers Association, agrees. Slow economic growth, stock market losses and low inflation have pushed interest rates to 40-year lows, Colling says. "Until there is economic news that leads to a significant and sustained stock-market rally, we can expect interest rates to remain near their current levels," he says. One of the factors driving down mortgage rates is the growing conviction that the Fed will cut the rate that banks pay one another for overnight loans to 1.5 percent from its current 1.75 percent. The Fed's next meeting is Nov. 6, and traders at the Chicago Board of Trade have priced in about a 50 percent chance that the Fed will cut the overnight rate at that meeting. If mortgage rates continue to decline, it will be interesting to see if homeowners will continue to refinance their home loans in huge numbers. At some point, you would expect that everyone has refinanced who has been able to refinance. That point has not been reached yet. The MBA's measure of mortgage applications and refinancings reached its highest-ever level last week, eclipsing the record set the previous week. Refinancing activity represented 77.9 percent of applications. -- Posted: Oct. 10, 2002 bankrate.com