Interest rates on long-term mortgages fell to their lowest ever on record during the past week, according to mortgage finance company Freddie Mac, spurred downward by the Federal Reserve’s latest injection into the economy.
The average rate on a 30-year fixed rate mortgage (FRM) sank to 3.40 percent, excluding points, during the week ended Sept. 27, down from the previous all-time low of 3.49 percent the week before. Last year, the average rate was 4.01 percent,
Meanwhile, the average rate on a 15-year FRM, popular with refinancers, fell to 2.73 percent, also a record low, down from 2.77 percent. One year ago, the average was 3.28 percent. The one-year adjustable rate mortgage (ARM) dropped to 2.60 percent, down from 2.61 percent, and down from 2.93 percent last year.
“Fixed mortgage rates continued to decline this week, largely due to the Federal Reserve’s purchases of mortgage securities, and should support an already improving housing market,” said Frank Nothaft, Freddie Mac vice president and chief economist in a statement.
Last week the Fed announced with institute QE3, a program of buying $40 billion worth of mortgage-backed investments every month in order to push rates down and keep the lending climate positive. These rock-bottom rates will certainly make buying and refinancing more attractive to some consumers.
“We’ve already seen low mortgage rates even before the Fed action,” said Anika Khan, a senior economist with Wells Fargo & Co. in Charlotte, North Carolina in a Bloomberg article. “We’ll continue to see mortgage rates come down. That means affordability will continue to be high.”
Yet others are not so sure this will make much of difference in the housing market.
“Mortgage rates haven’t been the impediment to home sales for quite some time,” said Keith Gumbinger, vice president of mortgage information company HSH.com in a CNN Money article. “There’s a sizable part of the market that can’t be served, or won’t be served, by low rates. There’s still a lot of people who don’t have jobs, don’t have equity or have bad credit.”