Mortgage rates hit another low

Mortgage rates hit new lows this week in response to the Federal Reserve's announcement that it will make big purchases of Treasurys and mortgage-backed securities, Freddie Mac said in releasing the results of its weekly rate survey.

The 30-year fixed-rate mortgage averaged 4.85 percent with an average of 0.7 point for the week ending March 26, down from 4.98 percent a week ago and 5.85 percent a year ago. The rate has never been lower since Freddie Mac began its survey in 1971.

Compared to a 30-year fixed-rate mortgage taken out at last year's high of 6.63 percent on July 24, the current rate represents savings of about $225 a month on a $200,000 loan, Freddie Mac chief economist Frank Nothaft said.

The survey tracks prime conventional conforming mortgages with a loan-to-value ratio of 80 percent. Borrowers making less than a 20 percent down payment, or seeking loans too large or risky for purchase or guarantee by Fannie Mae and Freddie Mac, can expect to pay higher rates.

Potential homebuyers are taking notice of historically low mortgage rates, Nothaft said, with sales of both new and existing homes up about 5 percent from January to February.

According to the National Association of Realtors, sales of existing homes rose 5.1 percent from January to February. But the seasonally adjusted annual rate of 4.72 million units was off 4.6 percent from a year ago (see story).

The Commerce Department reported this week that new-home sales rose 4.7 percent from the previous month, but were down 41 percent from a year ago (see story).

The Mortgage Bankers Association this week said it's expecting fewer purchase mortgages will be originated this year, but the group anticipates a huge wave of refinancings as borrowers seek to take advantage of rates not seen since the 1950s.

While lenders refinanced only $765 billion in mortgages last year, the MBA now expects refinancings to hit $1.96 trillion in 2009 -- $824 billion more than the group was forecasting in February. However, the MBA also lowered its projection for existing-home sales to 4.79 million, which would represent a 2.5 percent drop from 2008 levels (see story). ...CONTINUED

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