MORTGAGE RATES LOWEST IN 40 YEARS.

Byline: Gregory J. Wilcox Staff Writer

Driving refinancing activity to an all-time high, mortgage rates sank to a record low for the fourth consecutive week, an industry tracker said Thursday.

For the week that ended today, the interest on a 30-year fixed-rate mortgage averaged 5.61 percent, down 1.47 percentage points from 7.08 percent a year ago, according to mortgage company Freddie Mac. The current average rate is down 0.06 of a percentage point from the previous week.

Doug Perry, first vice president at Calabasas-based Countrywide Home Loans, said some customers have refinanced their mortgages several times in the past two years.

Ordinarily, that would not be normal, he said. ``Right now it is normal because of the low interest rates,'' he added.

Rates have hit a weekly low five times this year.

``It's an astounding environment to be in right now. We've never seen it in a modern market like this,'' said Amy Crews Cutts, Freddie Mac's deputy chief economist.

And the current four-week-long rate plunge added more steam to an already hot refinancing market that began the first week of January 2001.

In the past three weeks, refinancing applications soared 64 percent and shattered the Mortgage Bankers Association of America index that tracks this activity.

On Wednesday, the index had risen to 8,920.9 from 6,614 the prior week. The record is 29 percent higher than the old mark of 6,926.9 set the week of Oct 4, 2002, according to the Washington, D.C.-based trade group.

``Since the middle of last year, it's just shot up and stayed up. It's just been an incredible run of activity,'' said Phil Colling, the group's senior economist.

In the current survey, refinancing activity represented 79.8 percent of all mortgage applications, a record share.

Refinancing booms are typically measured in months. But since this one stretches back two years amid brisk housing sales, the market continues to churn up candidates seeking a lower monthly payment through a lower rate.

War worries, the sluggish economy and the bearish stock market get most of the credit for rates that are the lowest since they dipped to 5.9 percent for a while in 1963, Freddie Mac said.

Rates will eventually rise - some economists think they could go up one-half of a percentage point this year - but that should not be enough to derail a robust housing market. The low rates continue to draw buyers even though prices are at record-high levels.

Crews Cutts at Freddie Mac said the company's long-term outlook is favorable, and that rates should continue to bounce around their current level.

``I don't see any pressure for them to go up and stay up, and I don't think there is any pressure for them to go down,'' she said.

Nor do Crews Cutts and the others interviewed Thursday think the Federal Reserve Board will change the prime rate when it meets next week.

Freddie Mac's survey calls for the 30-year fixed rate to average 5.7 percent through the end of the third quarter and average 5.8 percent next year.

That would compare with the 1964-65 time frame when the rate averaged 5.8 percent.

Crews Cutts said Freddie Mac's model might be more optimistic than other models that predict interest rate directions. That doesn't necessarily mean it will be wrong.

``Every time the model pops out a number, we say it can't be (right), but here we are at 5.61 percent,'' she said.

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Chart:

MORTGAGE RATES PLUMMET

SOURCE: Freddie Mac

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