Mortgage rates sink on weak economic data

NEW YORK (CNNMoney.com) -- Mortgage rates dropped this week on weak economic data, sending refinancing activity higher, Freddie Mac reported Thursday.

The government-sponsored loan buyer said the rate on a 30-year fixed-rate loan averaged 5.87 percent for the week ending Jan. 10, down from 6.07 percent last week.

At this time last year, the 30-year fixed-rate mortgage averaged 6.21 percent.

Unemployment jumped to a two-year high of 5 percent in December and the service sector saw the slowest expansion in nine months, noted Frank Nothaft, Freddie Mac (FRE, Fortune 500) vice president and chief economist in a statement Thursday.

Additionally, the National Association of Realtors suggested a drop in pending home sales for November signaled a possible slowdown in December.

"As a result, mortgage rates came down across the board, with 30-year fixed mortgage rates at their lowest level in more than two years," Nothaft said.

"Because average mortgage rates have come down more than a quarter of a percentage point in the past two weeks, there has been a pickup in refinance activity as borrowers take advantage of the lower rates," he added.

Freddie Mac said 15-year fixed-rate loans averaged 5.43 percent, down from 5.68 percent last week. A year ago, the 15-year rate averaged 5.96 percent.

Five-year adjustable-rate mortgages (ARMs) averaged 5.63 percent this week, down from 5.78 percent last week. A year ago, the 5-year rate averaged 6.03 percent.

One-year Treasury-indexed ARMs averaged 5.37 percent, down from 5.47 percent last week. At this time last year, the 1-year ARM averaged 5.44 percent.