30-Year Interest Rates Drop to Record Low
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Saturday, March 28, 2009
Rates on 30-year mortgages fell this week to the lowest level on record after the Federal Reserve launched a new effort to assist the staggering U.S. housing market.
Mortgage finance giant Freddie Mac of McLean said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.85 percent this week, from 4.98 percent last week. It was the lowest in the history of Freddie Mac's survey, which dates to 1971, and was down a full percentage point from a year ago.
The previous record low of 4.96 percent was set in the week of Jan. 15. Rates fell after the Fed said last week that it will pump $1.2 trillion into the economy. The Fed is trying to lower rates by reducing the supply of outstanding mortgage bonds, boosting their price and lowering yields. That would allow banks to reduce the rates on new mortgages and still sell mortgage securities at a profit.
"The move by the Fed was especially aggressive," said Donald Rissmiller, chief economist at New York-based Strategas Research Partners. "We are starting to see tentative evidence that things are getting less bad."
Mortgage applications surged last week, mostly from borrowers looking to refinance. The Mortgage Bankers Association said Wednesday that its weekly application index climbed more than 30 percent for the week ended March 20.
Nearly 80 percent of applications came from borrowers seeking to refinance home loans at lower rates, rather than buy homes.
In Freddie Mac's survey, the average rate on a 15-year, fixed-rate mortgage dropped to 4.58 percent this week from 4.61 percent last week. Rates on five-year, adjustable-rate mortgages fell to 4.96 percent from 4.98 percent. Rates on one-year adjustables fell to 4.85 percent from 4.91 percent.
The rates do not include add-on fees known as points. The nationwide average fee was 0.7 point last week for all mortgages in Freddie Mac's survey except for one-year adjustable mortgages, which had an average fee of 0.6 point.
