Mortgage rates fall to third
straight record low
Mortgage Rate Trend
Index
Mortgage rate experts
polled by
Bankrate.com
last week don’t know
what to expect. While 40
percent predict rates
will continue to fall,
30 percent foresee and
increase and the
remaining 30 percent
expect no change of the
next 30 to 45 days.
WASHINGTON – Jan. 5, 2009 –
Rates on 30-year mortgages fell
to a record low for the third
straight week and borrowers took
advantage of the drop, sending
new applications soaring.
With the Federal Reserve on the
verge of pouring hundreds of
billions of dollars into the
devastated U.S. housing market,
mortgage rates have plunged to
the lowest level since Freddie
Mac started tracking the data in
April 1971.
Low rates are a great
opportunity for borrowers with
solid credit and plenty of
equity in their homes. But those
in danger of foreclosure are
still sidelined, and defaults
are expected to keep rising in
the coming months.
Freddie Mac reported Wednesday
that average rates on 30-year
fixed mortgages dropped to 5.1
percent this week, down from the
previous record of 5.14 percent
set last week. It was the ninth
straight weekly drop. The survey
was released a day early due to
the New Year’s holiday.
Mortgage rates have plunged by
about 1.3 percentage points
since late October, Freddie Mac
said. For a borrower taking out
a $200,000 loan, that means a
savings of more than $170 in
monthly payments, according to
Frank Nothaft, the mortgage
finance company’s chief
economist.
Meanwhile, mortgage applications
last week remained at the
highest level in more than five
years, the Mortgage Bankers
Association said.
The trade group’s weekly
application index was
essentially unchanged for the
week ending Dec. 26.
Applications surged earlier this
month to the highest level since
July 2003, when refinancing
activity boomed at the peak of
the housing market.
More than 80 percent of
applications came from borrowers
looking to refinance at more
affordable rates, the trade
group said.
Interest rates have plunged
since the Federal Reserve
pledged last month to buy up
mortgage-backed securities in an
effort to bolster the
long-suffering housing market.
The Fed, starting early next
month, will buy up to $500
billion in securities guaranteed
by the government-controlled
home loan giants Fannie Mae,
Freddie Mac and Ginnie Mae, a
federal agency.
“It’s a huge number,” said Derek
Chen, an analyst at Barclays
Capital, who noted that mortgage
rates are still high when
compared with yields on
long-term Treasury debt.
With the Fed and Treasury
Department buying up a
significant portion of the new
mortgage securities issued by
Fannie and Freddie next year,
that gap, or spread, could
narrow.
If that happens, mortgage rates
could fall further, possibly as
low as 4.5 percent, Chen said.
The average rate on a 15-year
fixed-rate mortgage dropped to
4.83 percent, the lowest point
since March 2004. That rate was
4.91 percent last week, Freddie
Mac said.
Rates on five-year,
adjustable-rate mortgages rose
to 5.57 percent, compared with
5.49 percent last week. Rates on
one-year, adjustable-rate
mortgages fell to 4.85 percent,
from 4.95 percent last week.
The rates do not include add-on
fees known as points. The
nationwide fee for 30-year,
15-year mortgages and five-year
adjustable rate mortgages
averaged 0.7 point last week,
compared with 0.5 point for
one-year adjustable-rate
mortgages.
Meanwhile, home prices dropped
by the sharpest annual rate on
record in October and there are
no signs the housing pain is
over.
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