Rates on 30-year fixed-rate mortgages dipped back below 5 percent this week, as mortgage rates followed bond yields lower for the third consecutive week, Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.

The 30-year fixed-rate mortgage averaged 4.99 percent with an average 0.7 point for the week ending Jan. 21, down from 5.06 percent last week and 5.12 percent a year ago.

The 15-year fixed-rate mortgage averaged 4.4 percent with an average 0.6 point, down from 4.45 percent last week and 4.8 percent a year ago.

Rates surveyed by Freddie Mac are for prime borrowers taking out loans with 20 percent downpayments. Borrowers taking out loans too large or risky for purchase or guarantee by Freddie Mac can expect to pay more.

Rates on 30-year fixed-rate mortgages hit a record low of 4.71 percent in early December, in records dating back to 1971, as the Federal Reserve continued buying up mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.

Many observers expect interest rates will head back up if the Federal Reserve follows through on its plan to wind down its $1.25 trillion purchase program by the end of March (see story).

In a Jan. 12 forecast, the Mortgage Bankers Association projected rates on 30-year fixed-rate mortgages will average 5.4 percent during the first three months of 2010, rising to 6.1 percent during the final quarter of the year. The MBA projects rates will continue to steadily increase, averaging 6.2 percent in 2011 and 6.5 percent in 2012.

One reason mortgage rates might be easing is if investors, fearing another stock market downturn, are moving money into bonds and mortgage-backed securities. Increased demand for those investments would drive their prices up, while lowering their yields.

Rates on adjustable-rate mortgage (ARM) loans are also easing, as investors aren’t expecting the Federal Reserve to boost the federal funds rate at its upcoming Jan. 26-27 meeting, said Freddie Mac chief economist Frank Nothaft.

The 5-year Treasury-indexed hybrid ARM averaged 4.27 percent this week, with an average 0.6 point, down from 4.32 percent last week and 5.24 percent a year ago, Freddie Mac said.

The 1-year Treasury-indexed ARM averaged 4.32 percent this week with an average 0.6 point, down from 4.39 percent last week and 4.92 percent a year ago.

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