Mortgage rates steady, hold below 4.40%

Home prices are stable or falling in most areas and mortgage rates have held below 5% on the 30-year fixed loan for 20 consecutive weeks.  Consequently, it would appear that a once-in-a lifetime opportunity to get a great deal on a new house, while also locking in a 30-year rate that is below 4.40%, are at hand.

So far, potential buyers aren't biting. Instead, they are waiting for an improvement in the economy and signs housing prices won’t keep falling before taking the plunge.

Freddie Mac, in its weekly survey, said the 30-year fixed-rate mortgage  averaged 4.37% with an average 0.7 point for the week ending September 23, 2010, unchanged from last week. Meanwhile, the 15-year fixed rate mortgage held at a record low of 3.82%.


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Plenty is working in favor of borrowers who would like to either refinance their current loan or would like to trade up or purchase their first house.

Mortgage rates are closely tied to the yield on the 10-year Treasury bond. Because the slowdown in the economy has further diminished inflation expectations, investors have been snapping up U.S. Treasurys.

But that's not the only reason mortgage rates have come down.  The Fed announced on August 10 that it would keep its balance sheet from shrinking by taking the runoff from mortgage-backed securities that are either maturing or being paid back via refinancings and reinvest the proceeds in Treasury bonds.

The added purchases have also worked to bring down yields, while the latest Fed statement suggested a more aggressive approach designed to bring down longer term rates and encourage more business and consumer spending (think housing) is also working in favor of low rates.

How long mortgage rates will hold at current levels is anyone’s guess, but the current environment has greatly increased the affordability of homes.