Mortgage rates cooled off this week, backing off their recent highs following Federal Reserve Chair Ben Bernanke's reassurances the Fed would not hasten to back off its program of Treasury bond purchases that produced record low rates over the past four years.

Average interest rates on 30-year fixed-rate mortgages fell to 4.37 percent this week, according to today's Freddie Mac rate survey, down from 4.51 percent last week. The average on 15-year fixed-rate loans fell to 3.41 percent, down from 3.53 percent previously.

Both rates are based on mortgages with an 80 percent loan-to-value ratio, with an average of 0.7 points in fees and discounts.

The average initial rate on 5-year Treasury indexed adjustable rate mortgages (ARMs) fell to 3.17 percent, down from 3.26 percent last week, with an average of 0.6 points in fees and discounts.

Bernanke pledges "highly accommodative" monetary policy

"Fixed mortgage rates fell as Federal Reserve (Fed) Chairman Bernanke helped ease market concerns about the Fed reducing its bond purchases," said Frank Nothaft, Freddie Mac chief economist. "During a question and answer session following a speech on July 10th, Chairman Bernanke indicated that a highly accommodative monetary policy is what's needed in the U.S. economy."

Signs that the economic recovery may be bogging down also contributed to the decline in mortgage rates. The University of Michigan index of consumer sentiment dropped unexpectedly this month, to its lowest point since April. Retail sales also grew slower than expected, with the monthly report from the Census Bureau showing a 0.4 percent increase, half of what economists had projected.

In addition, the Census Bureau also reported this week that new home construction starts dropped to their lowest level since last August.

Published on January 28, 2011