It's unknown whether or not the Federal Reserve's new stimulus will be able to whip the economy back into shape, but one thing's for sure: It's sent mortgage rates plummeting.[IMAGE]
Freddie Mac's ""Primary Mortgage Market Survey"":http://www.freddiemac.com/pmms/ showed new record lows in all categories except the 5-year adjustable-rate mortgage (ARM). The GSE reported that the 30-year fixed average fell to 3.40 percent (0.6 point) for the week ending September 27, down from 3.49 percent in the previous week's survey.
The 15-year fixed also dropped, averaging 2.73 percent (0.6 point) Ã¢â‚¬" down from 2.77 percent.
While the 5-year ARM didn't achieve any new lows, it did post a decrease from the week before, falling to 2.71 percent (0.6 point) from 2.76 percent before. Meanwhile, the 1-year ARM did hit a new record, dropping to 2.60 percent (0.4 point) from 2.61 percent.
The continuous drops add to an already amount of good news for the housing market.
""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, VP chief economist for Freddie Mac. ""For instance, the S&P/Case-Shiller 20-city home price index rose 1.2 percent over the 12 months ending in July, reflecting the largest annual increase since August 2010.""
Nothaft also pointed to new home sales, in particular the strong two-month pace set in July and August.
According to ""Bankrate's"":http://www.bankrate.com/ weekly survey, the 30-year fixed average slid down to 3.55 percent from 3.70 percent a week before. The 15-year fixed fell along with it, averaging 2.88 percent (from 2.95 percent previously). The 5/1 ARM also fell, but only slightly Ã¢â‚¬" it averaged 2.68 percent for the week, down from 2.69 percent a week ago.
While the Fed may be successful in encouraging home purchases with this new round of quantitative easing, only time will tell if the stimulus will have its intended effect on the economy.
""The hope of the Fed is to juice the economy by reducing mortgage rates further, spurring home purchases and refinancings,"" Bankrate said in a release. ""The part about reducing interest rates is certainly working, and it will no doubt pull forward some home purchases. But there is plenty of skepticism about whether this will be enough to jumpstart the sluggish economy.""