Freddie Mac credits the Federal Reserve’s additional purchases of long-term fixed mortgage securities with pushing the average interest rate on 15-year fixed-rate mortgages (FRMs) down to 2.69 percent and below the 2.72 average interest rate on the 5-year adjustable rate mortgage for the first time since late 2009.
Weeks ago, the Federal Reserve added another $40 billion to its $45 billion monthly purchase of mortgage-backed securities, specifically to keep mortgage interest rates low for the next several years.
It’s working. Unfortunately, or fortunately, depending upon how you view the news, a anemic economy is also contributing to lower interest rates.
“Fixed mortgage rates fell again this week to all-time record lows due to the mortgage securities purchases by the Federal Reserve and indicators of a weakening economy. The final estimate of growth in Gross Domestic Product was revised down to 1.3 percent in the second quarter, representing the slowest growth in a year,” said Frank Nothaft, vice president and chief economist at Freddie Mac
Even the housing market is looking shaky.
“In addition, personal incomes rose only 0.1 percent in August, while July’s increase was revised downward. And finally, pending home sales just fell 2.6 percent, well below the market consensus forecast of a slight increase,” Nothaft added.
By the numbers
The average rate on the 30-year fixed-rate mortgage (FRM) fell to a new record low of 3.36 percent, with an average 0.6 point for the week ending Oct. 4, down from 3.40 percent last week and 3.94 percent a year ago, according to Freddie Mac’s Primary Mortgage Market Survey
The average rate on the 15-year FRM, likewise fell to a new record low, 2.69 percent, with an average 0.5 point, down from 2.73 percent last week and 3.26 percent a year ago.
The average interest rate on 5-year Treasury-indexed, hybrid adjustable rate mortgages (ARMs) ticked up to 2.72 percent this week, with an average 0.6 point. Last week, it averaged 2.71 percent. The 5-year ARM averaged 2.96 percent a year ago.
Finally, for the week ending Oct. 4, Freddie Mac reported the 1-year Treasury-indexed ARM averaged 2.57 percent, with an average 0.4 point, down from 2.60 percent last week, and 2.95 percent a year ago.