WASHINGTON – Home loan rates fell for the fifth week in a row to their lowest in decades, pushed down by an aggressive government campaign to reduce borrowing costs.
The average for the 30-year, fixed-rate mortgage declined from 4.78% last week to 4.71%, its April low point and the lowest since Freddie Mac began tracking rates in 1971.
The average for the 15-year loan also declined from 4.29% to 4.27%.
ARM rates were mixed, with the average for the five-year ARM inching up from 4.18% to 4.19%, and the average for the one-year ARM dropping from 4.35% last week, to 4.25% this week.
CUNA’s chief economist Bill Hampel attributed the fall in rates to the Fed’s intervention in the credit markets, which has kept rates on ten-year Treasuries low, around 3.25%, and propped up the secondary mortgage market by supporting Fannie Mae and Freddie Mac.
The Federal Reserve has been buying up $1.25 trillion of mortgage-backed securities over the past six months in order to add liquidity to the mortgage market. As a result, “the secondary market has full confidence in Fannie and Freddie to support these mortgages,” Hampel told The Credit Union Journal yesterday. That means investors have not demanded a premium for Fannie- and Freddie-backed mortgage-backed securities, keeping rates low, explained the CUNA economist.
The New York Federal Reserve said yesterday it will buy Fannie- and Freddie- and FHLB-backed MBS maturing between December 2013 and April 2016 in an open market operation today.
The program is scheduled to expire next spring.
