Fed action sends mortgage rates below 5%

Fed action sends mortgage rates below 5%
By Mary Ellen Podmolik
Copyright © 2009, Chicago Tribune
11:31 AM CDT, March 19, 2009
http://www.chicagotribune.com/business/chi-mortgage-rates-mar19,0,6706728.story


That didn't take long.

Less than a day after the Federal Reserve said it would double its purchases of mortgage debt, fixed rates on conforming 30-year mortgages fell well below 5 percent, and there's thought rates may stay there for a while.

A check of local lenders' Web sites show rates ranging from 4.625 percent to 4.75 percent, not including points. The last time mortgage lenders offered rates this low was for a day or so in December. The rates are the lowest since at least 1965, according to Freddie Mac.

This time, the new floor for rates may be around for a while, after the Federal Reserve's announcement Thursday that it would buy up to $300 billion of long-term U.S. Treasuries and increase purchases of Fannie Mae- and Freddie Mac-backed securities to $1.25 trillion, up from $500 billion.

The rate drop is likely to encourage more borrowers to see whether they can qualify for the monthly savings. Don't be surprised, though, by busy signals at your local lender. They have been deluged with applications from homeowners trying to refinance their mortgages.

The Mortgage Bankers Association on Wednesday said mortgage applications for the week ended March 13 rose 21.23 percent, as the average interest rate on 30-year, fixed rate mortgages dropped to 4.89 percent, from 4.96 percent earlier in the month. More than two-thirds of the applications nationally were for refinancings.

"It becomes a capacity issue with how much we can do," said Victor Ciardelli III, CEO and president of Guaranteed Rate in Chicago. "We can only handle so much. We've been closing over $500 million a month for the past two months."

He added, "I'd be shocked if it goes a lot lower."