Breaking News: Mortgage Rates Plunge

By E. Scott Reckard with the LA Times


The Fed’s decision to continue its economic stimulus program unabated has sent fixed mortgage rates plunging to their lowest level in two months, according to Freddie Mac’s weekly survey, with the 30-year loan averaging 4.32%, down from 4.5% a week earlier.

Lenders were offering 15-year fixed mortgages to solid borrowers at 3.37% early this week, down from 3.54% last week. Initial rates for variable mortgages fell as well, Freddie Mac said Thursday.

The Fed announced last week that the economy was still not strong enough to allow the central bank to cut back on its $85 billion a month in purchases of Treasury securities and bonds backed by mortgages. The effect is to push down interest rates, stimulating the economy by making it cheaper to borrow.

The low rates should “somewhat” offset recent increases in home prices, improving housing affordability, Freddie Mac chief economist Frank Nothaft said.

Freddie Mac, which buys and guarantees home loans, asks lenders each Monday through Wednesday about the terms they are offering to borrowers with good credit, 20% down payments or home equity, and sufficient income to handle payments on home loans.

The borrowers in the latest survey would have paid an average of 0.7% of the loan balance in upfront lender fees and discount points to obtain the fixed mortgages.

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