Sunday, April 5, 2009

Mortgage Rates Hit Lowest Level On Record.

By Brian Louis

April 2 (Bloomberg) -- Fixed mortgage rates in the U.S. fell to a record low for the second consecutive week, signaling that Federal Reserve Chairman Ben Bernanke’s effort to spur the housing market is gaining traction.

The 30-year rate dropped to 4.78 percent from 4.85 percent a week earlier, the lowest since records began in 1971, Freddie Mac said today in a statement.

Rates are falling to historic lows as the Federal Reserve ramps up purchases of mortgage-backed bonds to support home lending. Mortgage applications in the U.S. rose for a fourth consecutive week as a decline in borrowing costs prompted more refinancing.

“Lower rates will help increase demand for homes,” said Celia Chen, senior director at Moody’s in West Chester, Pennsylvania. “We need to see stronger demand for homes to help end the housing correction.”

The Fed’s efforts to expand lending “should make new consumer, business, and mortgage loans more available, at lower cost,” Bernanke said in a March 20 speech to a Phoenix banking conference.

Bernanke’s Comments

Government purchases of mortgage securities are helping to reduce the interest rates that Fannie Mae and Freddie Mac buyers require on home loans “thereby lowering the rate at which lenders, including community banks, can fund new mortgages,” Bernanke said.

The 30-year fixed mortgage rate may bottom at 4.4 percent, said Scott Anderson, senior economist at Wells Fargo & Co. in Minneapolis.

“We’re not going to see mortgage rates a lot lower than they are today,” Anderson said. “It’s going to be a lot harder to push rates lower from here.”

The average rate on a 15-year fixed mortgage also hit a record low of 4.52 percent, down from 4.58 percent, McLean, Virginia-based Freddie Mac said today.

Falling mortgage rates and lower prices have lifted demand for U.S. homes. The number of Americans signing contracts to buy previously owned homes rose 2.1 percent in February, the National Association of Realtors said yesterday. The index of signed purchase agreements, or pending home resales, rose to 82.1 from 80.4 in January.

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