Mortgage rates reverse course, reaching record low
Mortgage rates dropped to a record low this week, the first decline in a month, as the Federal Reserve began a program to buy Treasury bonds to support the economy.
The rate for a 30-year fixed loan fell to 4.17 percent from 4.24 percent, Freddie Mac said. That was the lowest level in the company's records dating to 1971. The average 15-year rate declined to 3.57 percent from 3.63 percent last week.
Rates on five-year adjustable-rate mortgages fell to their lowest level in at least five years. They averaged 3.25 percent, down from 3.39 percent a week earlier. It is the lowest rate on records dating back to January 2005.
Rates on one-year adjustable-rate home loans were unchanged at 3.26 percent.
The rates do not include add-on fees, known as points. One point is equal to 1 percent of the total loan amount. The average fee for 30-year and 15-year fixed loans in Freddie Mac's survey was 0.8 point. It was 0.7 point for one-year and five-year mortgages.
The Fed announced last week that it would buy $600 billion of Treasuries to keep interest rates low and boost economic growth, a method known as quantitative easing. Yields on government bonds serve as a benchmark for other debt, signaling home loan rates may fall further after seven months of declines.
"The quantitative easing is helping to lower interest rates overall, and as a result, the longer-term mortgage interest rates are also falling," Celia Chen, a housing economist at Moody's Analytics Inc. in West Chester, Pa., said.
The previous record low for the 30-year rate was 4.19 percent, reached in the week ended Oct. 14.
Falling mortgage rates have boosted refinancings. The number of mortgage applications increased 5.8 percent in the week ended Nov. 5, the Mortgage Bankers Association's index showed Wednesday.
Refinancing climbed 6 percent and purchase applications rose 5.5 percent, the most since Oct. 1, the mortgage banking group said. The refinancing gauge has more than doubled since January.
-From news services