Mortgage Interest Rates Lowest in decades – time to buy!

Long-term mortgage rates fell to new all-time lows this week following a move by the Federal Reserve to buy up more than $1 trillion dollars in assets, according to Freddie Mac’s weekly mortgage-rate survey released Thursday.

Interest rates on 30-year mortgages stood at an average 4.85% this week, down from 4.98% last week and a full percentage point below where they were this time last year, the survey found. The results mark the lowest 30-year rates have been since the survey’s creation in 1971, breaking the previous low of 4.96% set the week of January 15.

Fifteen-year mortgage rates also set a new all-time low, falling to 4.58% this week from
last week’s 4.61%. This time last year, rates on 15-year mortgages stood at 5.34%, according to the survey.

Thirty-year mortgage rates, which tend to track yields on long-term government debt, have been on a downward spiral for weeks — but the Federal Reserve’s decision to inject $1.2 trillion into the economy marks a concerted effort to ensure those rates remain low for cash-strapped consumers.

“The Federal Reserve’s announcement that it intends to purchase Treasury securities over the next six months caused bond yields to drop and mortgage rates followed,” said Frank Nothaft, vice president and chief economist at Freddie Mac, in a statement. 

With interest rate levels so low, homeowners with $200,000 loans are paying approximately $225 less in monthly mortgage payments than they were in July of last year, when 30-year rates peaked at 6.63%, he said.

Despite the Fed’s efforts, a massive $34 billion five-year note auction failed to draw massive demand on Wednesday, sending the yield on 10-year Treasury notes to jump to 2.8%. The weak auction sparked concerns that the Fed’s actions might not be effective in reining in rising bond yields.

Still, homeowners seemed to rejoice in the Fed’s actions. On Wednesday, the Mortgage Bankers Association said its mortgage application index surged more than 30% for the week ended March 20, with almost 80% of applications coming from buyers looking to refinance.

“Mortgage rates fell sharply to low levels not seen in six decades following the Federal Reserve’s announcement on the Treasury bond and mortgage-backed securities purchase programs. The drop offered a sizable refinance incentive for most homeowners, sparking a pickup in refinance activity,” said Orawin Velz, associate vice president of economic forecasting at the Mortgage Bankers Association.

By: Lauren Covello:  FOX Business News

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