Mortgage rates in the U.S. fell to the lowest since May as mortgage refinance loans surged on reduced borrowing costs. The average thirty-year rate fell to 5.14% from 5.20%, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The fifteen-year mortgage rate was 4.63%. “It’s been stuck in this low-five range for a number of weeks,” Donald Rissmiller, chief economist at New York-based Strategas Research Partners, said. “This is still a good interest rate.”
The Mortgage Bankers Association’s index of home loan applications rose 4.3% to 514.4 in the week ended July 10. Purchase applications fell 9.4 % while requests to refinance gained 18%, indicating prospective buyers are still wary of falling home prices while property owners are taking advantage of low rates to reduce their monthly payments. Kelly Media Group Founder, Jason Cardiff of the Mortgage Lead Company, said, “The result of lenders cutting fees will trickle down to homeowners and eventually provide a hedge against inflation for the rest of 2009.”
Federal Reserve Chairman Ben S. Bernanke is trying to reduce lending costs with a $1.25 trillion program to purchase securities backed by home loans. According to data compiled by Bloomberg, the worldwide credit crunch spurred by bad credit mortgages has cost the world’s financial firms almost $1.5 trillion in losses and more asset write-downs.
Last month, the Federal Reserve left the size of its buying program intact and kept the benchmark rate for federal funds at between 0 and 0.25 %. The rate will stay at “exceptionally low rate levels” for an “extended period,” the Federal Open Market Committee said in a statement June 24th. “We’re going to see more of the same out of the Fed,” Rissmiller said. “They’ve been happy with what’s happened.”
April’s Record Low
Mortgage rates reached a record low 4.78 % twice in April after the central bank announced its plan to boost buying of both mortgage securities and Treasuries. Those purchases brought down yields on government debt and mortgage-backed bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae, allowing lenders to reduce mortgage rates on new home loans and still sell the securities at a profit. Home loan rates started climbing in May along with Treasury yields on investor concern that ballooning government debt would fuel inflation.