WASHINGTON – May 23, 2008 – Rates on 30-year mortgages dipped below 6 percent this week, falling to their lowest level in five weeks.

Freddie Mac, the mortgage company, reported Thursday that 30-year fixed-rate mortgages averaged 5.98 percent this week. That was down from 6.01 percent last week.

It was the lowest level for 30-year mortgages since they averaged 5.88 percent the week of April 17. After that, 30-year rates climbed above 6 percent for four straight weeks.

Rates on 15-year fixed-rate mortgages also fell, dropping to 5.55 percent, down from 5.60 percent last week. However, rates on one-year and five-year adjustable rate mortgages rose for the week.

The five-year adjustable-rate mortgage edged up to 5.61 percent from 5.57 percent last week. The rate on one-year ARMs rose to 5.24 percent, up from 5.18 percent last week.

Analysts said financial markets pushed longer-term rates down in response to economic reports showing continued weakness in the economy. However, rates on adjustable rate mortgages rose because they are more sensitive to what the Federal Reserve intends to do with the short-term rates it controls.

Financial markets are growing more convinced that the Fed has now moved to the sidelines and will not cut rates further out of concern about inflation pressures. The Fed aggressively cut rates seven straight times starting last September, with the last reduction occurring in April. But minutes of that meeting released Wednesday showed Fed officials viewed that April 30 quarter-point cut as a “close call.”

The Fed is balancing the risks of a weak economy this is flirting with a recession against rising inflation pressures. Many analysts believe the Fed will remain on hold for the rest of this year and its next move will be to start raising interest rates, but probably not until the middle of next year.

While mortgage rates remain at attractive levels for home buying, the home market is facing numerous other headwinds from slumping prices, which are keeping potential buyers on the fence, to rising mortgage defaults which are dumping more homes on an already glutted market. In addition, many banks have raised their lending standards in response to the surge in mortgage defaults.

The mortgage rates do not include add-on fees known as points. The nationwide average fee for 30-year fixed-rate mortgages was 0.5 point. The other mortgage categories surveyed by Freddie Mac all carried a 0.6 point average fee.

A year ago, rates on 30-year mortgages stood at 6.37 percent, 15-year mortgage rates averaged 6.06 percent, five-year adjustable-rate mortgages were at 6.02 percent and one-year adjustable-rate mortgages were at 5.64 percent.

On the Net: Freddie Mac: http://www.freddiemac.com

Copyright © 2008 The Associated Press, Martin Crutsinger (AP Economics Writer). All rights reserved. This material may not be published, broadcast, rewritten or redistributed.