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Thursday, November 20, 2008

Mortgage Rates, Demand Continue Decline

Adam Samson

FOXBusiness

Mortgage rates and demand slipped in the last two weeks amid continued economic and financial tumult.

The average rate for a 30-year mortgage continued falling for a third straight week to 6.04% for the week ended November 20, from 6.14% in the previous week according to a report by Freddie Mac (FRE). This reading comes in at 0.2% below the average weekly reading since May 1.

The interest rates for shorter-term 15-year mortgages also declined, to 5.73% from 5.81% in the previous week. One-year adjustable-rate mortgages too saw some relief, falling to 5.29% from 5.33% in the previous week.

Freddie Mac says the decline is due to weakening increasing financial and economic headwinds.

"Long- and short-term mortgage rates fell for the third consecutive week amid continuing signs of a slowing economy," said Freddie Mac chief economist Frank Nothaft in a release. "Retail sales fell for the fourth straight month in October and consumer sentiment remained near a 28-year low in November.

Mortgage demand is also slipping, according to a report released Wednesday by the Mortgage Bankers Association. The MBA Purchase Index -- a proxy for new mortgage activity -- tumbled by 13% for the week ended Nov. 14. The report also showed nearly half of mortgage activity was due to individuals refinancing mortgages, up from 45% in the previous week.

Generally, mortgage demand increases as a result of lower interest rates, but this boost in demand has yet materialize.