WASHINGTON – Rates on 30-year mortgages plunged this week to the lowest level since January, and are poised to fall further after the Federal Reserve launched a new effort to prop up the flailing housing market.
Mortgage finance giant Freddie Mac said Thursday that average rates on 30-year fixed-rate mortgages dropped to 4.98 percent this week.
That was down from 5.03 percent last week. It was the lowest since the week of Jan. 15, when it was at 4.96 percent.
The rate quotes included in Freddie Mac’s survey were taken before the Fed said Wednesday it will pump $1.2 trillion into the economy in an effort to lower rates on mortgages and other and loosen credit.
That is expected to drive mortgage rates down further.
Consequently, if you’ve got a good job, solid credit and your home’s value hasn’t fallen dramatically, you’re likely to benefit from the Fed’s plan to buy up to $300 billion of long-term government bonds and $750 billion in additional mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac.
The national average rate on 30-year, fixed mortgages was 5.15 percent on Wednesday, according to financial publisher HSH Associates. The Fed’s plan likely will produce a drop in mortgage rates from 0.25 to 0.5 percentage points.
“It’s going to keep rates low for a longer period of time,” said Greg McBride, senior financial analyst at Bankrate.com.
Average rates for 30-year-fixed-rate mortgages hit a record low of 4.96 percent in January, according to mortgage finance company Freddie Mac. That was after the Fed launched its initial plan to buy $500 billion in mortgage-backed securities.
The Fed, seeking to push rates down further, is effectively planning to buy at least half of the home loans made in the U.S. this year based on last year’s total of about $1.4 trillion in mortgages. Around 70 percent of new loans in recent months have been backed by Fannie and Freddie, the mortgage finance companies seized by government regulators in September.
Fannie and Freddie own or guarantee almost 31 million mortgages worth about $5.5 trillion, more than half of all U.S home mortgages.
Still, mortgage lenders have severely restricted the availability of new loans to borrowers who don’t have 20 percent down payments and good credit.
While the Fed’s actions are likely to aid those who have saved up to make a down payment on their house, or have enough equity in their homes to refinance, they are less likely to benefit the nearly 14 million American households that owe more on their home loans than their houses are worth, or those on the verge of foreclosure.
Mortgage applications jumped 21 percent last week from a week earlier, as low interest rates fueled refinancing activity, according to the Mortgage Bankers Association.