Demand for mortgages continues to pick up as rates head deeper into record territory, according to surveys by Freddie Mac and the Mortgage Bankers Association.

Rates on 30-year fixed-rate mortgages averaged 3.40 percent with an average 0.6 point for the week ending Sept. 27, down from 3.49 percent last week and 4.01 percent a year ago, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. That’s a new low in Freddie Mac records dating to 1971.

Demand for mortgages continues to pick up as rates head deeper into record territory, according to surveys by Freddie Mac and the Mortgage Bankers Association.

Rates on 30-year fixed-rate mortgages averaged 3.40 percent with an average 0.6 point for the week ending Sept. 27, down from 3.49 percent last week and 4.01 percent a year ago, Freddie Mac said in releasing the results of its latest Primary Mortgage Market Survey. That’s a new low in Freddie Mac records dating to 1971.

For 15-year fixed-rate loans — popular for refinancing — rates averaged 2.73 percent with an average 0.6 point, down from 2.77 percent last week and 3.28 percent a year ago. That’s a new low in records dating to 1991.

Rates on five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans averaged 2.71 percent with an average 0.6 point, down from 2.76 percent last week and 3.02 percent a year ago. Rates on five-year ARM loans hit a low in records dating to 2005 of 2.69 percent during the week ending July 19.

For one-year Treasury-indexed ARM loans, rates averaged 2.60 percent with an average 0.4 point, down from 2.61 percent last week and 2.83 percent a year ago. Rates on one-year ARM loans have never been lower in records dating to 1984.

"Fixed mortgage rates continued to decline this week, largely due to the Federal Reserve’s purchases of mortgage securities, and should support an already improving housing market," said Freddie Mac chief economist Frank Nothaft, citing recent gains in the S&P/Case-Shiller 20-city home price index. New homes also sold in July and August at the strongest two-month pace since March and April 2010, Nothaft noted.

The Federal Reserve’s Sept. 13 announcement that it would embark on a third round of quantitative easing ("QE3") by stepping up its purchases of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac by $40 billion a month has pushed mortgage rates into uncharted territory. The first round of quantitative easing — $1.25 trillion in purchases of Fannie and Freddie debt and MBS — wound down in 2010, and helped push mortgage rates below 5 percent.

The open-ended MBS purchases announced as part of QE3 are on top of the Fed’s policy of reinvesting principal payments from existing Fannie and Freddie MBS and debt into more MBS. The Fed’s MBS purchases, and swaps of short-term Treasurys for long ones ("Operation Twist"), will boost the Fed’s holdings of long-term securities by about $85 billion each month through the end of the year.

Although industry groups including the National Association of Realtors have warned that the impact of QE3 may be muted by tight mortgage underwriting standards and pending regulations, a survey by the Mortgage Bankers Association showed applications for purchase loans were up 5 percent during the week ending Sept. 21 from the same time a year ago. That follows a 7 percent increase in purchase loan demand from a year ago during the week ending Sept. 14.

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