Bernanke Mortgage Rates Get 4% Handle First Time: Chart of Day

The lowest fixed mortgage rates on record may fall further after the Federal Reserve tripled its commitment to buy securities backed by conventional home loans.
By: Kathleen M. Howley: Bloomberg.com
Lenders will be setting rates “with the knowledge that there is a large buyer in the market ready with a bid at prices deliberately aimed at bringing down spreads,” said Jay Brinkmann, the chief economist at the Mortgage Bankers Association in Washington.

The CHART OF THE DAY shows spreads on mortgages and consumer loans versus benchmark interest rates. The gap between 15- and 30-year fixed-rate mortgages and the 10-year Treasury note narrowed since the Fed started buying mortgage securities in January.

The average U.S. rate on a 30-year fixed mortgage fell to 4.96 percent during the week ended Jan. 15, the lowest according to Freddie Mac data that goes back to 1971. This week the rate is 4.98 percent, the McLean, Virginia-based mortgage buyer said in a report yesterday. The 15-year fixed rate is 4.61 percent, the lowest since 2003.

The Fed said March 18 it would increase its purchases of mortgage-backed securities this year by up to an additional $750 billion, adding to the $500 billion it pledged between January and June. The central bank also said it would buy as much as $300 billion in Treasuries during the next six months.

The moves are aimed at giving “greater support to mortgage lending and housing markets,” the Fed governors said in their March 18 statement.