Mortgage Rates in U.S. Match Record Low Set in April

Mortgage Rates in U.S. Match Record Low Set in April (Update2) Business
By Brian Louis
Nov. 25 (Bloomberg) -- Fixed 30-year mortgage rates dropped for a fourth consecutive week, matching a record low set in April, in a decline that may further support increasing sales in the battered housing market.
The rate dropped to 4.78 percent from 4.83 percent last week, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The average 15-year rate was 4.29 percent.
Low mortgage costs and a tax credit for first-time homebuyers are helping increase demand for property, putting existing home sales on pace to hit 6.1 million this year. A falling number of unsold homes is also beginning to stabilize prices. The S&P/Case-Shiller home-price index rose 0.27 percent in September from August, the fourth consecutive gain.
“When mortgage rates track down to well below 5 percent, that is a key threshold that generates a lot of interest in terms of new purchases and refinancing,” said Brian Bethune, chief financial economist at IHS Global Insight in Lexington, Massachusetts. “The market is gradually pulling out of this huge hole, this huge recession it was in."

Purchases of new homes in the U.S. rose 6.2 percent in October to an annual pace of 430,000, the highest level since September 2008, the Commerce Department said today.
A Federal Reserve program to buy up to $1.25 trillion in securities backed by home loans is scheduled to end the first quarter of next year.
Yields Fall
The bond purchases from Fannie Mae, Freddie Mac and Ginnie Mae, which buy mortgages from lenders and package them into bonds, brought yields on the securities down this year and allowed lenders to reduce mortgage rates while still selling the securities at a profit.

Yields on Fannie Mae and Freddie Mac mortgage securities fell to the lowest in more than six months yesterday.

Fed officials have agreed to gradually slow the central bank’s buying “to promote a smooth transition in markets as the announced purchases are completed,” according to minutes of their Nov. 3-4 meeting released yesterday.

President Barack Obama signed legislation this month to extend and expand a homebuying tax credit, which may further boost property sales.

The tax credit for first-time buyers was set to expire Nov. 30 and may have sparked an increase in existing home sales in October. Purchases of existing homes rose 10.1 percent to the highest level since February 2007.

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.

Last Updated: November 25, 2009 10:47 EST