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WASHINGTON – Sept. 19, 2008 – Rates on 30-year mortgages dropped sharply again this week, falling to the lowest level in seven months, as rates continue to decline following the government’s dramatic takeover of mortgage giants Fannie Mae and Freddie Mac.

Freddie Mac reported Thursday that its nationwide survey found 30-year, fixed-rate mortgages declined to 5.78 percent this week, down from 5.93 percent last week.

It was the fifth consecutive weekly decline and pushed the 30-year mortgage to the lowest level since it stood at 5.72 percent the week of Feb. 14. The decreases have accelerated over the past two weeks since the government announced on Sept. 7 that it was taking control of Fannie Mae and Freddie Mac because of huge losses the companies were experiencing due to soaring defaults on mortgage loans as home prices slump.

Private economists had predicted the government’s move would result in lower mortgage rates for consumers because it removed a huge uncertainty about the future of the two firms, which own or guarantee half the nation’s mortgages.

Frank Nothaft, chief economist at Freddie Mac, noted that the big drop in mortgage rates was fueling a boom in mortgage refinancings, with mortgage applications up 58 percent since mid-August, led by a 122 percent gain in refinancings.

The 30-year mortgage hit a high for this year at 6.63 percent on July 24 and had been above 6 percent from late May until last week.

The Freddie Mac survey showed that other mortgage rates declined this week as well.

Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, fell to 5.35 percent, down from 5.54 percent last week.

Rates on five-year, adjustable-rate mortgages averaged 5.67 percent this week, down from 5.87 percent last week.

One-year, adjustable-rate mortgages fell to 5.03 percent, down from 5.21 percent last week.

The mortgage rates do not include add-on fees known as points. The nationwide fee for 30-year and 15-year mortgages averaged 0.6 point. The average fee for five-year mortgages was 0.7 point while the fee on one-year mortgages was 0.5 point.

A year ago, rates on 30-year mortgages stood at 5.72 percent, 15-year mortgage rates averaged 5.34 percent, five-year adjustable-rate mortgages were at 6.21 percent and one-year adjustable-rate mortgages stood at 5.65 percent.

Source: FAR