Fed Announcement Sends Mortgage Rates to New Lows

By:: Kara Johnson | November 11, 2010

Mortgage rates fell again to new record lows this week, following the Federal Reserve’s announcement that it plans to buy $600 billion in Treasury bonds to boost lending and the economy.

Interest rates on 30- and 15-year fixed-rate loans and 5-year adjustable rate mortgages all fell to new lows in the weekly Freddie Mac rate survey, released this morning. Average rates on the standard 30-year mortgage fell to 4.17 percent, down from 4.24 percent the week before, while 15-year rates averaged 3.57 percent, down from 3.63 percent last week.

But the biggest decline was on the initial rates for 5-year Treasury indexed ARMs, which fell 14 basis points to 3.25 percent, down from 3.39 percent last week.

“Following the Federal Reserve November 3^rd policy announcement that it plans to purchase up to $600 billion in government securities, Treasury bond yields initially fell and then gradually rose again,” said Frank Nothaft, Freddie Mac senior economist. “This allowed mortgage rates to fall to record levels this week.”

Nothaft noted that despite historically low mortgage rates, the housing market continues to struggle owing to job uncertainty and tight credit. The unemployment rate has remained at or above 9.5 percent for the past 15 months, while the Federal Reserve reports that commercial banks have tightened their lending standards in 16 of the past 17 quarters, a period stretching back more than four years.

Those who can get approved for a home purchase or mortgage refinance are finding historic bargains on mortgage rates. Compared to one year ago this week, 30- and 15-year rates are down roughly three-quarters of a percentage point each, from 4.91 percent and 4.36 percent, respectively, while 5-year ARMs are down by more than a whole percentage point, from 4.29 percent.

The survey is based on data collected from Monday through Wednesday of the current week.

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Loan Type	Today	+/-
30 yr fixed	3.69
15 yr fixed	3.00
5/1 ARM	2.69

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