Mortgage rates back off

NEW YORK (CNNMoney.com) -- Mortgage rates eased slightly after taking their biggest jump in four years a week ago, Freddie Mac said Thursday.

The government-sponsored loan buyer said the average rate on a 30-year fixed-rate loan slipped to 6.69 percent for the week ending June 21, from 6.74 percent the previous week.

Last year at this time, 30-year mortgage rates averaged 6.71 percent.

"Mortgage rates eased this week due to market concerns that the housing market will be a longer drag on the economy," Frank Nothaft, Freddie Mac (Charts, Fortune 500) vice president and chief economist said in a statement.

"May's housing starts fell for the first time in four months," he said, "while homebuilder optimism in June fell to a sixteen-year low."

The 30-year rate stood at 6.15 percent on May 10th, just before it turned sharply up.

Rising rates, among other factors, have caused industry groups, the Mortgage Bankers Association (MBA) and the National Association of Realtors to push back their forecasts for a home price recovery. Both groups are now looking to early 2008, compared with a previous outlook for mid-2007.

Doug Duncan, chief economist for the MBA, has said he expects mortgage rates to top out near 7 percent by the end of the year.

If rates go up, would-be home buyers face higher monthly mortgage payments, cutting into overall affordability. The 0.54 percentage point increase since May 10 represents a jump of $105 a month on a $300,000 loan.

The rate on a 15-year loan averaged 6.37 percent, down from 6.43 percent a week ago.

A year ago, the 15-year rate averaged 6.36 percent.

Five-year Treasury-indexed adjustable-rate mortgages (ARMs) averaged 6.31 percent this week, down from 6.37 percent last week.

One-year Treasury-indexed ARMs averaged 5.66 percent this week, down from 5.75 percent last week. At this time last year, they averaged 5.75 percent.