Apr 27, 2009
Fixed Mortgage Rates Drop
From Bloomberg:
Fixed mortgage rates in the U.S. fell for a second consecutive week as the Federal Reserve plan to buy mortgage-backed securities helped drive rates lower.
The rate for a 30-year fixed home loan declined to 4.80 percent from 4.82 percent a week earlier, Freddie Mac, the McLean, Virginia-based mortgage buyer, said today. The 15-year fixed rate was unchanged at 4.48 percent.
The Fed said on March 18 it would purchase as much as $750 billion of additional mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae. The program helped lower rates earlier this month to 4.78 percent, a record low in Freddie Mac data going back to 1971.
“The policy is working,” said Celia Chen, senior director at Moody’s Economy.com in West Chester, Pennsylvania. “Mortgage interest rates are falling to a record low. That will stimulate some buying of homes.”
Sales of previously owned U.S. homes fell in March after jumping a month earlier by the most in more than five years. Purchases decreased 3 percent to an annual rate of 4.57 million, lower than forecast, from 4.71 million in February, the National Association of Realtors said today in Washington. The median price slumped 12 percent from a year ago and distressed properties accounted for about 50 percent of all sales.
The central bank is trying to lower rates by cutting 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.
Mortgage Refinance
Fed Plan
The Fed announced a program in November to purchase $500 billion of securities backed buy home loans guaranteed by U.S. mortgage-buying agencies. It’s also buying up to $300 billion in Treasuries to lower interest rates.
U.S. home prices fell 6.5 percent in February from a year earlier, the second-smallest drop in six months and a sign that low mortgage rates may be spurring demand. Prices in February rose 0.7 percent from the prior month, the Federal Housing Finance Agency in Washington said yesterday. The FHFA’s monthly house price index is down 9.5 percent from its April 2007 peak.
The number of mortgage applications in the U.S. rose last week, boosted by an increase in refinancing applications.
Should I Refinance
The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 5.3 percent to 1,172.2 in the week ended April 17, from 1,113.2 the week before. The group’s purchase index dropped 4.2 percent and the refinancing gauge rose 7.7 percent.
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