Washington Business Journal
Market watchers expect the Federal Reserve’s decision to buy U.S. Treasuries will drive down mortgage rates in coming weeks, but they were already falling this week.
Freddie Mac’s weekly rate report says 30-year fixed-rate mortgages fell to an average of 4.98 percent this week, down from 5.03 percent last week and just shy of the all-time low 4.96 percent in mid-January.
A year ago, 30 year mortgages were averaging 5.87 percent.
“Long-term mortgages followed bond yields lower for the second week as reports of slower industrial production suggested that business spending might ease this year,” said Freddie Mac (NYSE: FRE) chief economist Frank Nothaft.
Following the Fed’s announcement of a new round of initiatives it hopes will speed economic recovery, yields on 10 year treasury bonds fell by about a half percentage point, marking the largest one-day decline since Oct. 20, 1987.
Reports this week suggested existing homeowners are already lining up to lock in new mortgages at lower rates. Fannie Mae (NYSE: FNM) said this week its refinancing volume surged to $41 billion last month. The Mortgage Bankers Association said applications to refinance existing mortgages jumped 30 percent last week.
There is little incentive left for homeowners or buyers to choose riskier adjustable rate mortgages.
The average one-year adjustable rate mortgage (ARM) this week was 4.91 percent, nearly on par with current fixed rate averages.
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