Mortgage rates remain at record lows, not as a result of poor economic data, but rather in expectation of additional efforts by the Federal Reserve to revive the economy. Specifically, investors are counting on the Fed to resume quantitative easing - purchases of government bonds in an effort to drive market interest rates even lower. Investors have been front-running the Fed by buying government debt now, bringing bond yields to ultra-low levels. Mortgage rates tend to move closely with yields on long-term government bonds, but didn't fall in tandem with government debt yields this week. Mortgage bond investors are pricing for the risk that loans could be refinanced if the Fed's efforts reduce mortgage rates further.
The last time mortgage rates were above 6 percent was Nov. 2008. At that time, the average rate was 6.33 percent, meaning a $200,000 loan would have carried a monthly payment of $1,241.86. With the average rate at 4.5 percent, the monthly payment for the same size loan would be $1,013.37, a savings of $228 per month for a homeowner refinancing now.
SURVEY RESULTS
30-year fixed: 4.5% - same as 4.5% last week (avg. points: 0.36)
15-year fixed: 3.94% - down from 3.96% last week (avg. points: 0.31)
5/1 ARM: 3.68% - down from 3.71% last week (avg. points: 0.26)
