Mortgage Rates Hold Steady

By:: Kara Johnson | January 28, 2010

Mortgage rates remained relatively unchanged this past week, according to the weekly Freddie Mac market survey.

Average interest rates on both 30-year and 15-year fixed rate mortgages fell a single basis to 4.98 percent and 4.39 percent, respectively. Last week’s averages were 4.99 percent and 4.40 percent, both with 0.6 points paid.

Average rates on 5-year Treasury-indexed hybrid adjustable rate mortgages (ARMs) were little changed as well, declining two basis points to an average of 4.25 percent with 0.6 points paid.

Frank Nothaft, Freddie Mac chief economist, noted that rates had held steady during the week in advance of the Federal Reserve’s policy committee meeting. The Fed subsequently announced that it would be leaving the Federal Funds interest rate unchanged for the near future, while winding down its purchases of mortgage backed securities on schedule.

Raising the Federal Funds rate, which is what banks charge each other for overnight loans, would likely indicate early concerns about inflation, as well as driving up interest rates overall. There are also concerns over the direction interest rates will take when the Fed ends its programs to purchase mortgage-backed securities at the end of March and June. The Fed indicated it is prepared to revisit these programs if needed to support financial stability and economic growth.

Despite the stability in mortgage interest rates, refinance activity dropped sharply last week, falling 15 percent, according to the Mortgage Bankers Association, and making up about two-thirds of all mortgage applications. Michael Fratantoni, MBA vice president of research and economics, said the decline appears to be due to a shrinking pool of borrowers still interested in refinancing. Mortgage interest rates have been near historic lows for much of the past nine months.

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National Rates

Loan Type	Today	+/-
30 yr fixed	3.72
15 yr fixed	3.03
5/1 ARM	2.75

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