Mortgage rates hit another low

The picture for mortgage rates changed dramatically on March 18, when the Federal Reserve announced it would purchase up to $300 billion in long-term Treasury securities over the next six months, and boosted a previous commitment to buy $500 billion in mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae to as much as $1.25 trillion (see story).

Increased demand for Treasurys and mortgage-backed securities pushes their prices up. Because yields move in the opposite direction of prices, rates on 10-year Treasurys fell this week, and mortgage rates followed, Nothaft said in a statement.

Freddie Mac said 15-year fixed-rate mortgages averaged 4.58 percent with an average 0.7 point this week, down from 4.61 percent last week and 5.34 percent a year ago. That's a record since Freddie Mac began tracking 15-year fixed-rate mortgages in 1991.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 4.96 percent with an average 0.7 point, down from 4.98 percent last week and 5.67 percent a year ago. The 5-year ARM has never been lower since the survey began tracking those loans in 2005.

One-year Treasury-indexed ARMs averaged 4.85 percent with an average 0.6 point, down from 4.91 percent last week and 5.24 percent a year ago.

With rates at historic lows, the question for many borrowers becomes how long they will last. The Fed's actions and mounting federal deficits could weaken the dollar and spur inflation, which could send interest rates back up. In addition, a first-time homebuyer tax credit of up to $8,000 expires at the end of November.

MBA chief economist Jay Brinkmann said this week that low rates should be available for "at least the next several months." But if fears of inflation cause investors to shun Treasurys, the Fed's impact on long-term interest rates could be short-lived, he said.

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