Mortgage Rates Set New Record Lows in Freddie Mac Survey

Interest rates on home loans sunk to new lows this week, according to figures ""released by Freddie Mac"":http://www.freddiemac.com/pmms/release.html?week=45&year=2010&display=release Thursday.
[IMAGE] Although rates have been hovering near their lowest levels in more than a half-century for some time now, the GSE's chief economist, Frank Nothaft, expressed concern that they've done little to pull would-be buyers from the sidelines as the housing recovery continues to slow.

Freddie Mac surveyed about 125 lenders from across the country and found that average interest rates on 30-year fixed-rate mortgages dropped to 4.17 percent (0.8 point) for the week ending November 11. That's down from last week's average of 4.24 percent.

Rates for 15-year fixed mortgages averaged 3.57 percent (0.8 point) this week, down from 3.63 percent reported by Freddie the week prior.

The 5-year adjustable-rate mortgage (ARM) dropped from 3.39 percent to 3.25 percent (0.7 point), while the 1-year ARM remained unchanged at 3.26 percent (0.7 point).

Rates for all the loan products tracked by Freddie Mac were reported to set new all-time lows in the GSE's survey.

""Following the Federal Reserve November 3rd policy announcement that it plans to purchase up to $600 billion in government securities, Treasury bond yields initially fell and then gradually rose again. This allowed mortgage rates to fall to record levels this week,"" Nothaft explained.

The Fed’s decision to pump more capital into the nation’s sluggish economy is intended to keep interest rates low in the hopes of sparking economic growth. The central bank

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bought $1.7 trillion in mortgage-backed securities (MBS), GSE debt, and Treasury bonds from November 2008 to March of this year, and that effort did prove successful in pushing mortgage interest rates down.

But some analysts say they don’t expect the same results from this second round of the Fed’s quantitative easing initiatives.

It’s been suggested that the effects of the central bank’s policy move have already been priced into rates because the market had been anticipating the decision for several weeks prior. It’s also true that mortgage rates have remained at historically low levels even after the Fed made its first exit from the securities market back in March, meaning the market is holding its own without the government intervention.

A separate ""report released by Bankrate"":http://www.bankrate.com/finance/mortgages/rates-edge-higher-awaiting-qe2.aspx?ic_id=tsFS1 Thursday shows that mortgage rates are rising despite the Fed’s policy decision, at least at some larger banks. Bankrate’s study averages rates from the top 10 banks and thrifts in the top 10 U.S. markets.

The tracking company found that the average rate on the benchmark conforming 30-year fixed mortgage increased to 4.46 percent (0.34 point) this week, up from 4.42 percent reported last week.

The average 15-year fixed mortgage increased from 3.81 percent last week to 3.84 percent (0.33 point) this week, according to Bankrate, while the larger jumbo 30-year fixed rate rose from 5.04 percent to 5.08 percent.

Adjustable rate mortgages were mostly higher in Bankrate’s study as well, with the average 5-year ARM rebounding to 3.62 percent and the average 7-year ARM climbing to 3.95 percent.

Bankrate also ""surveys a panel of mortgage experts"":http://www.bankrate.com/finance/mortgages/mortgage-rate-trend-index8-157054-1.aspx each week to gauge the direction rates are headed over the next seven days.

Half of the panelists forecast mortgage rates to rise over the next week. Only 29 percent predict mortgage rates will fall, and the remaining 21 percent expect mortgage rates to remain more or less unchanged in the coming week.