Mortgage rates, already at record lows, look to fall even more thanks to the Fed’s move to buy up more mortgage-backed securities and treasuries.
The 30-year fixed-rate mortgage averaged 4.98 percent for the week ending March 19, down from 5.03 percent a week earlier and 5.87 percent a year ago, according to mortgage financier Freddie Mac.
The 15-year fixed slipped to 4.61 percent from 4.64 percent a week earlier, and sits well below its year-ago average of 5.27 percent.
Meanwhile, the five-year ARM fell a single basis point to 4.91 percent, while the one-year adjustable-rate mortgage increased 11 bps to 4.91 percent.
A year ago, the five-year averaged 5.56 percent and the one-year stood at 5.15 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 Frank Nothaft, FreddieMac vice president and chief economist.
But mortgage rates are expected to fall much lower after the Fed announced plans to buy another $750 billion in agency mortgage-backed securities and $300 billion in long-term treasuries.
“Following the March 18th Federal Reserve monetary policy statement, which announced further spending initiatives on financial assets, long-term bond yields plummeted. Yields on 10-year Treasury bonds fell by about a half percentage point after the announcement, marking the largest one-day decline since October 20, 1987.”
The move will bring their total MBS purchases to a whopping $1.25 trillion this year.
“In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued, the Fed said in a release.
“Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.”
I recently spoke out against four percent mortgage rates and the dangers ultra-low mortgage rates pose to a possible recovery.
Wells Fargo is already offering a 30-year fixed at 4.625 percent…
(photo: cloudsoup)
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