Following reports of weak economic growth, rates on long-term mortgage loans fell in the latest week, according to mortgage financier Freddie Mac Thursday.

“Mortgage rates followed bond yields higher this week following reports of record continuing jobless claims and a downward revision in economic growth in the fourth quarter of 2008,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Real Gross Domestic Product was revised from a 3.8 percent decline to a 6.2 percent drop in the fourth quarter mostly led by a 4.3 percent fall in consumer spending, which was the largest decrease since the second quarter of 1980.”

The average rate on a 30-year fixed rate mortgage dropped to 5.03 percent, excluding fees, during the week ended March 12, 2009, down from 5.15 percent the previous week. One year ago, the average rate was 6.13 percent.

Rates on 15-year fixed rate home loans averaged 4.64 percent, a decrease from 4.72 percent the week before. Last year at this time, the average rate was 5.60 percent.

The average interest rate on a one-year adjustable rate mortgage fell to 4.80 percent, doen from 4.86 percent last week. During the same week of 2008, the average rate was 5.14 percent.

In addition to the reports of weak GDP figures, Nothaft commented that negative housing data also had a downward effect on rates this week.
“The housing market continues to slow as well,” he said. “New home sales fell 10.2 percent in January to the slowest pace since records began in January 1963 while pending existing home sales slowed by 7.7 percent, the weakest since the series began in January 2001. More recently the Federal Reserve noted in its March 4th regional economic report that residential real estate markets remained in the doldrums in most areas, with only scattered, very tentative signs of stabilization.”

Yet there may be a silver lining to the gloomy economic news. “Given the recent historically low mortgage rates, homeowners have a strong incentive to try and refinance,” Nothaft said.