Mortgage rates fell sharply this week on softer economic news, Freddie Mac reported today.

The average rate on 30-year fixed-rate mortgages dropped 21 basis points from a week ago, dipping from 6.24 percent to 6.03 percent, and the average 15-year fixed mortgage tumbled from 5.72 percent to 5.47 percent.

Points, or fees that lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 on the 30- and 15-year loans.

The National Association of Realtors expects the median price of U.S. resale homes to drop 1.2 percent this year, following a 1.4 percent decline in 2007, with sales of resale homes slipping for the third consecutive year.

The forecast report released today also anticipates a 31.1 percent drop in single-family housing starts, a 6.1 percent decline in new-home prices, a rise in housing affordability and a dip in consumer confidence this year compared to 2007.

The federal funds rate is expected to average 3 percent in 2008, compared with 5 percent in 2007, according to the NAR forecast.