Mortgage Rates Fall To Record Lows; 30-Year At 4.85% -Freddie

By Amy Hoak

The average rate on 30-year fixed-rate mortgages hit a record low this week, after the Federal Reserve announced it would purchase Treasury securities over the next six months, Freddie Mac's chief economist said on Thursday.

The 30-year mortgage averaged 4.85% for the week ending March 26, the lowest point since Freddie Mac's weekly survey began in 1971. Last week, the mortgage averaged 4.98%; the mortgage averaged 5.85% a year ago.

Fifteen-year fixed-rate mortgages and five-year adjustable-rate mortgages also hit record lows.

The 15-year fixed-rate mortgage averaged 4.58% this week, and hasn't been lower since 1991, when the survey began tracking the mortgage. The 15-year mortgage averaged 4.61% last week and 5.34% a year ago.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.96% this week, the lowest since the survey began tracking the ARM in 2005. The ARM averaged 4.98% last week, and 5.67% a year ago.

One-year Treasury-indexed ARMs averaged 4.85%, down from 4.91% last week and 5.24% a year ago.

"The Federal Reserve's announcement that it intends to purchase Treasury securities over the next six months caused bond yields to drop and mortgage rates followed," said Frank Nothaft, Freddie Mac chief economist, in a news release. "Rates for 30-year fixed-rate mortgages peaked last year at 6.63% on July 24. With this week's 30-year fixed-rate mortgage, the interest rate difference is almost two percentage points, which amounts to a savings of about $225 in monthly mortgage payments for a $200,000 loan."

To obtain the rates, the fixed-rate mortgages as well as the 5-year ARM required payment of an average 0.7 point. The 1-year ARM required payment of an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

Potential home buyers are taking notice of the low rates, Nothaft said.

"Both new and existing home sales rose 5% in February. First-time home buyers accounted for half of all existing home sales, according to the National Association of Realtors. In addition, mortgage applications for home purchases consecutively rose over the first three weeks in March, based on figures published by the Mortgage Bankers Association."

The MBA reported a 41.5% rise in refinance applications filed last week, compared with the week before.

-Amy Hoak; 415-439-6400; [e-mail]