Mortgage rates were flirting with record lows, and that was before the Federal Open Market Committee announced a substantial increase in the amount of debt purchases to take place this year. In an announcement Wednesday afternoon, the Fed revealed intentions to purchase an additional $750 billion of mortgage-backed securities, as much as $100 billion more in debt issued by government sponsored entities Fannie Mae and Freddie Mac, and up to $300 billion in long-term government debt. Mortgage rates declined more than one-quarter percentage point in response. Even more significant than the immediate "honeymoon effect" on mortgage rates is the intent of the Fed to keep mortgage rates low through the remainder of 2009, a critical factor in getting homebuyers into the market to absorb the inventory of unsold and foreclosed homes.
Mortgage rates have dropped substantially since the peak of financial tensions five months ago. The average 30-year fixed mortgage rate in mid-October was 6.74 percent, meaning a $200,000 loan would have carried a monthly payment of $1,295.87. With the average rate now at 5.29 percent, the monthly payment for the same size loan would be $1,109.37, a savings of $186 per month for a homeowner refinancing now.
SURVEY RESULTS
30-year fixed: 5.29% - down from 5.37% last week (avg. points: 0.33)
15-year fixed: 4.86% - down from 4.88% last week (avg. points: 0.36)
5/1 ARM: 5.24% - down from 5.34% last week (avg. points: 0.48)
