Mortgage rates remained at or near record lows this week as the Federal Reserve moved to keep a lid on long-term interest rates in order to encourage borrowing in the face of ongoing concerns that the European debt crisis will derail an economic recovery.

The Fed on Wednesday announced a plan to move $400 billion currently invested in Treasurys with maturities of three years or less into government bonds with remaining maturities of six years to 30 years.

That’s likely to make long-term bonds — including the mortgage-backed securities (MBS) that fund most home loans — more scarce, raising the cost to purchase them and pushing down their yields.

In an action specifically targeted at keeping mortgage rates low, the Fed also said it would reinvest principal payments on its holdings of Fannie Mae and Freddie Mac debt ($110 billion) and MBS ($885 billion) back into agency-backed MBS as those investments mature.

Before ending the program last year, the Federal Reserve bought up $1.25 trillion in MBS guaranteed by Fannie Mae and Freddie Mac, which helped bring mortgage rates down to near-record lows. One reason mortgage rates have stayed low is because worries about the European debt crisis have cast doubt on an economic recovery and investors see agency-backed MBS as a safe haven.

Rates on 30-year fixed-rate mortgages averaged 4.09 percent with an average 0.7 point for the week ending Sept. 22, Freddie Mac said in releasing the results of its weekly Primary Mortgage Market Survey.

That’s unchanged from a week ago, keeping the popular "plain vanilla" loan at an all-time low in records dating to 1971. The 30-year fixed-rate mortgage averaged 4.37 percent at this time a year ago, before rising to a 2011 high of 5.05 percent in February on heightened expectations for an economic recovery.

Rates on 15-year fixed-rate mortgages averaged 3.29 percent with an average 0.6 point, a new low in records dating to 1991. That’s down from 3.3 percent last week and a 2011 high of 4.29 percent in February.

For five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 3.02 percent with an average 0.6 point, up from 2.99 percent last week but down from a 2011 high of 3.92 percent in February. The five-year ARM was at an all-time low in records dating to 2005 during the weeks ending Sept. 1 and Sept. 8, when it averaged 2.96 percent.

Rates on 1-year Treasury-indexed ARM loans averaged 2.82 percent with an average 0.6 point, up from 2.81 percent last week but down from  a 2011 high of 3.4 percent in February. Last week’s rate for 1-year ARMs was a low in records dating back to 1984.

Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans fell a seasonally adjusted 4.7 percent during the week ending Sept. 16 compared to the week before, while requests for refinancings were up 2.2 percent from week-to-week. Requests for refinancings accounted for 78.3 percent of all mortgage applications.

During August, the MBA said, investors accounted for 5.7 percent of purchase loan applications, a slight increase from 5.5 percent in July.

In a Sept. 12 forecast issued before the Fed’s "Operation Twist" announcement, MBA economists predicted rates on 30-year fixed-rate mortgages would rise to an average of 4.5 percent during the final three months of this year, and climb to an average of 5 percent during the fourth quarter of 2012.

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