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Mortgage rates inch higher
Freddie Mac economist predicts popularity of adjustable-rate mortgages to decline.
July 28, 2005: 11:43 AM EDT

NEW YORK (CNN/Money) - Mortgage rates rose slightly this past week, but the adjustable-rate home loans may soon fall out of favor, the government-chartered mortgage company Freddie Mac said Thursday.

The average rate on 30-year fixed-rate mortgages climbed to 5.77 percent for the week ending Thursday, with an average 0.5 point payable up front, up from 5.73 percent the previous week, according to the mortgage finance firm's survey.

Last year at this time, the rate on the 30-year fixed-rate loan stood at 6.08 percent.

"Although inching upwards, the average 30-year fixed-rate mortgage rate for the month of July was lower than the annual averages since our survey began in 1971," said Frank Nothaft, vice president and chief economist at Freddie Mac said in a statement.

The 15-year mortgage rate edged higher to 5.34 percent, with an average 0.5 point payable up front, up from 5.32 percent the week before. A year ago, the loan averaged 5.49 percent.

Five-year adjustable-rate mortgages (ARMs) rose to an average 5.27 percent, with an average 0.6 point payable up front, up from last week's 5.26 percent.

No data is available for year-over-year comparisons since Freddie Mac only began tracking these rates this year.

Nothaft anticipated that the popularity of adjustable rate mortgages will decline due to the uncertainty of future monthly payments.

"Currently, we are experiencing a rather flat yield curve," he said in his statement. "As a result, ARMs will probably become less popular because the uncertainty of future monthly payments may outweigh the savings realized in the initial rate period."

One-year adjusted-rate mortgages rose to an average 4.46 percent this week, with an average 0.6 point, up from 4.42 percent last week.

At this time last year, the one-year adjustable-rate loan averaged 4.17 percent. The last time the rate for the one-year loan was higher was the week ending July 19, 2002 when it averaged 4.50 percent.

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