30-year rates fall back below 5 percent

Mortgage rates for 30-year, fixed-rate home loans fell for the first time in a month this week as the Federal Reserve pledged to keep its benchmark rate near zero.

The average rate fell to 4.98 percent from 5.03 percent a week earlier, the mortgage company Freddie Mac said Thursday.

The average rate on 15-year, fixed-rate mortgages declined to 4.40 percent from 4.46 percent. Rates on five-year, adjustable-rate mortgages averaged 4.35 percent, down from last week's 4.42 percent. Rates on one-year, adjustable-rate mortgages decreased to 4.47 percent from 4.57 percent.

Borrowers can lower their interest rates by buying points, each worth 1 percent of the loan amount. The nationwide averages in Freddie Mac's survey were 0.7 points for 30-year loans and 0.6 points for 15-year, five-year and one-year loans.

The Federal Reserve has pumped $1.25 trillion into mortgage-backed securities to lower rates on mortgages and loosen credit. Rates on 30-year mortgages traditionally track yields on long-term government debt.

The bond purchases, from Fannie Mae, Freddie Mac and Ginnie Mae, brought down yields on mortgage-backed securities and allowed lenders to reduce rates on new loans while still selling the securities backed by them at a profit. The plan helped drive mortgage rates to a record low of 4.78 percent twice in April.

The central bank's purchasing program is scheduled to end in the first quarter of next year, the Federal Open Market Committee has said.

It reiterated those plans Wednesday and kept its benchmark overnight lending rate at zero to 0.25 percent, where it has been since December.

Both houses of Congress approved legislation this week that extends and expands the home-purchase tax credit to include buyers who already own homes. President Obama was expected to sign the bill into law.

In the expanded bill, buyers who have owned their current homes at least five years would be eligible for tax credits of up to $6,500. First-time home buyers -- or anyone who hasn't owned a home in the last three years -- would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30, 2010, and close by June 30.