Debt Consolidation

  Average interest rates on 30-year fixed mortgages declined by two-tenths of a percent from the week before, according to two of the leading weekly mortgage rate surveys. Government-sponsored megalender Freddie Mac reported that 30-year rates for the week the week ending June 18 averaged 5.38 percent, down from 5.59 percent the week before.Mortgage rate surveys often vary widely in their reported averages due to differences in survey methods, but typically show consistent trends in terms of the overall market. The Bankrate survey, released Wednesday, reported a higher average rate but a near-identical decline, with 30-year rates averaging 5.76 percent, down from 5.95 percent the week before.

  Mortgage rates backed off from their recent highs this past week, ending three weeks of sharp increases that had squelched strong demand for refinancing and dampened interest in home purchases.

Indicators suggest rates may stabilize

   Analysts contacted by the Wall Street Journal said they expect bonds to at or below those rates for the near future, possibly dropping as low as 3.5 percent. If that happens, 30-year-mortgage rates should remain stable or perhaps even decline slightly.Applications to refinance a mortgage took another big drop in the current weekly survey by the Mortgage Bankers Association, with the survey's Refinance Index dropping 23 percent to 1998, compared to 6800 when the Index peaked in early April. The current MBA survey does have a longer lag time than the other two surveys, reporting results for the week ending June 12; effects of the current rate drop may not show up until the survey released next week.That could reawaken interest in mortgage refinancing as homeowners adjust their expectations to accept interest rates in the mid-5 percent range, rather than expecting the unusually low sub-5 percent rates that were available in April and May.

     Investors had driven up interest rates on 10-year Treasury bonds in recent weeks as signs of an improving economy gave rise to concerns that aggressive government efforts to boost the economy would give rise to inflation. The bonds, which are closely tied to mortgage rates, were yielding as little as 2.5 percent in mid-March before starting a climb that topped out above 4 percent last week. Since then, yields have eased back to as little as 3.6 percent before returning to around 3.8 percent this morning.