The Federal Reserve’s announcement confirming a third round of quantitative easing sent long-term mortgage rates tumbling to all-new record lows this week.
Freddie Mac’s Primary Mortgage Market Survey showed a drop in both the 30-year and 15-year fixed. According to the survey, the 30-year fixed-rate mortgage (FRM) averaged 3.49 percent (0.6 point) for the week ending September 20, down from 3.55 percent the week before.
The 15-year FRM also fell this week, averaging 2.77 percent (0.6 point). The previous survey showed an average of 2.85 percent.
Adjustable-rate mortgages (ARMs) saw so slippage, however. The 1-year ARM saw no change from last week, averaging 2.61 percent (0.4 point). The 5-year ARMactually increased, rising to 2.76 percent (0.6 point) from 2.72 percent before.
The Fed’s announcement adds to the other good news the housing market has been seeing, said Frank Nothaft, VP and chief economist at Freddie Mac.
“Following the Federal Reserve’s announcement of a new bond purchase plan, yields on mortgage-backed securities fell, bringing average fixed-mortgage rates to their all-time record lows, which should aid in the ongoing housing recovery,” Nothaft said. “New construction on one-family homes rebounded in August, rising by 5.5 percent to the fastest pace since April 2010. In addition, existing home sales increased by 7.8 percent in August to its strongest pace since May 2010.”
Bankrate’s weekly survey showed drops in all categories. The 30-year fixed plummeted to 3.70 percent from 3.81 percent last week, while the 15-year fixed fell to 2.95 percent from 3.04 percent. Meanwhile, the 5/1 ARMdropped to 2.69 percent from 2.75 percent.
While the new stimulus may be good for housing, Bankrate wondered if the Fed’s plan will be able to achieve its intended goal.
“Unhappy with the pace of economic recovery or job growth, the Fed felt compelled to take additional measures, even if those measures will be more effective at boosting the stock market and reducing interest rates than the stated intentions of lifting economic output and aiding job growth,” Bankrate said in a release.