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Mortgage Rates Mixed This Week but Expected to Head Lower

Interest rates on home loans offered up a mixed bag of results this week, with fixed-rate mortgages showing no change or dipping slightly and adjustable-rate mortgages ticking upward, according to data released Thursday by ""Freddie Mac"":http://www.freddiemac.com.

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Even with the inconsistencies, mortgage rates across the board remain near their record lows. Those lows may drop farther still with the ""Federal Reserve's announcement"":http://dsnews.comarticles/new-fed-stimulus-gse-mortgage-bonds-and-treasuries-on-shopping-list-2011-09-21 Wednesday that it's planning a new buying spree of mortgage-backed securities and long-term Treasuries.

Leading indicators in the bond market since the Fed's statement suggest mortgage rates will again start falling.

For the week ending September 22, Freddie Mac puts the average rate for a 30-year fixed mortgage at 4.09 percent (0.7 point), matching last week's average.

The GSE's survey results are based on mortgage rate data collected from about 125 lenders across the country.

The 15-year fixed-rate mortgage this week averaged 3.29 percent (0.6 point) in Freddie's study, down from 3.30 percent last week.

The 5-year adjustable-rate mortgage (ARM) posted an average of 3.02 percent (0.6 point) this week. That's up from 2.99 percent the week before.

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The 1-year ARM is now averaging 2.82 percent (0.6 point), up slightly from 2.81 percent last week.

Yields on U.S. Treasuries generally are pretty closely tied to mortgage rate trajectories, and in one day’s time those yields have fallen across the gamut of maturities.

On Thursday, following the Federal Reserve’s stimulus announcement, the 10-year Treasury yield plunged to a new all-time low of 1.72 percent, down from 1.88 percent late Wednesday.

The yield on the 30-year Treasury bond has plummeted more than 30 basis points since the Fed made its statement, settling at 2.78 percent by the end of day Thursday, also a record low.

Analysts at the research firm ""Capital Economics"":http://www.capitaleconomics.com say the yields on close substitutes for Treasuries, such as U.S. corporate bonds, have also fallen.

“[In announcing a planned lengthening of the maturity of its securities holdings, the [Federal Reserve] has achieved its objective of lowering long-term interest rates,” Capital Economics said.

However, the firm pointed out that “Thursday’s continued sharp drop in equity and commodity prices reflects the waning ability of monetary policymakers to convince investors they can right the economy.”

Erin Lantz is director of ""Zillow Mortgage Marketplace"":http://www.zillow.com, which provides borrowers with real-time mortgage rates based on quotes submitted daily by mortgage lenders. She observed an 18 basis point drop in the 30-year fixed rate between Wednesday and Thursday.

Lantz says although the Federal Reserve’s new policy initiatives “will likely exert some downward pressure on rates, I expect the impact in the coming months will be limited to around 10 basis points since the market had already included in prices much of the anticipated decline, and since mortgage rates are already at such low levels.”

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.
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