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'Twist' likely to send mortgage rates plunging to new lows

By Palm Beach Business.com

DELRAY BEACH — Mortgage rates continue to hang near record lows that are likely to be shattered in the coming weeks thanks to the Federal Reserve and Operation Twist.

Freddie Mac’s Primary Mortage Market Survey released Thursday found the 30-year fixed-rate mortgage averaging 4.09 percent with 0.7 point, same as a week ago. Bankrate’s national mortgage survey, also released Thursday, had the 30-year at 4.29 percent with 0.41 point, down from 4.32 percent a week ago. That’s a record low for the Bankrate survey.

“A sluggish economy and investor concerns over the European debt markets left mortgage rates largely unchanged this week,” said Frank Nothaft, chief economist for Freddie Mac. “Manufacturing activity in both the New York and Philadelphia regions contracted in September. Moreover, the Federal Reserve Board reported that households lost nearly $150 billion in net worth in the second quarter, representing the first quarterly decline in a year.”

But the real news of the week happened Wednesday, when the Federal Reserve announced Operation Twist, a plan to buy $400 billion in long-term federal securities as a means of bringing down long-term loan rates and stimulate the economy over the next six to nine months. Yields on the 10-year Treasury bond dropped to 1.72 percent on Thursday from 1.95 percent on Tuesday.

Mortgage rates are often pegged to the 10-year bond.

Also from the surveys: The 15-year fixed-rate mortgage dropped to 3.29 percent with 0.6 point from 3.30 percent a week earlier, according to Freddie Mac. That’s a new record.
In the Bankrate survey, the 15-year fell to 3.42 percent with 0.31 point from 3.44 percent a week earlier.

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SEPTEMBER 23, 2011 click to go home
 
         
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