Earlier this week Zillow reported that mortgage rates once again hit all-time lows. Zillow found the average rate on a 30 year fixed rate mortgage to be 4.07 percent. Freddie Mac’s mortgage rate survey (released yesterday) echoes these findings, although Freddie found the average rate to be 4.17 percent on a 30 year fixed mortgage. This is down .07 percent from the previous week and down nearly a full point from the same time a year prior. Differences in methodology account for the differences between the two reports.
According to Frank Noraft, Freddie Mac’s Chief Economist:
“Following the Federal Reserve Nov. 3 policy announcement that it plans to purchase up to $600 billion in government securities, Treasury bond yields initially fell and then gradually rose again. This allowed mortgage rates to fall to record levels this week. Despite historically low mortgage rates, however, the housing recovery continues to be slow owing in part to household job uncertainty and tight credit conditions”.
I am not so sure that the additional round of quantitative easing is responsible for the decline in mortgage rates yet. The bond and mortgage backed securities markets have been volatile since the details of QE2 were announced, and I would more likely attribute the record low rates to short term volatility more than anything else. The Fed only announced its bond purchase schedule today, so no purchases have actually been made yet, and QE2 has to a large extent already been baked into the price of bonds. It is certainly possible I could be wrong, we will have to see what happens next week.
Whatever the cause of the decline in mortgage rates, this is good news for prospective borrowers.
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