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U.S. mortgage rates drop to 5.2 percent


Wal-Mart.com USA, LLCmortgage_rates_drop Jul. 9, 2009 08:09 AM

Bloomberg News

July 9 — Mortgage rates in the U.S. fell for a second consecutive week, easing concern that a Federal Reserve plan to lower the cost of home loans had lost momentum.

The average 30-year rate dropped to 5.2 percent from 5.32 percent, mortgage buyer Freddie Mac of McLean, Virginia, said today in a statement. The 15-year rate averaged 4.69 percent.

If I were trying to refinance, I wouldn’t wait very long, said Dana Johnson, chief economist at Dallas-based Comerica Bank. I don’t think mortgage rates are going to stay down here very long.

Federal Reserve Chairman Ben S. Bernanke is trying to lower borrowing costs with a $1.25 trillion program to purchase securities backed by home loans. The central bank is trying to combat the almost four-year housing slump that contributed to the global credit crunch and cost the worlds financial firms almost $1.5 trillion, according to data compiled by Bloomberg.

The decline in rates boosted mortgage applications last week as refinancing rose by the most since March and purchases climbed to the highest level in three months.

The Fed last month left the size of its buying program intact and kept the benchmark rate for federal funds at between zero and 0.25 percent. The rate will stay at exceptionally low levels for an extended period, the Federal Open Market Committee said in a statement June 24.

Mortgage rates reached a record low 4.78 percent twice in April after the central bank announced its plan to boost buying of both mortgage securities and Treasuries.

Those purchases brought down yields on government debt and mortgage-backed bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae, allowing lenders to reduce rates on new loans and still sell the securities at a profit.

Yields Fluctuate

Mortgage rates started climbing in May along with Treasury yields as investors became concerned that more government debt being sold to fund federal spending would fuel inflation.

The June unemployment rate rose to 9.5 percent, the highest in almost 26 years, the Labor Department said last week.

The Mortgage Bankers Associations index of applications to purchase a home or refinance a loan rose 11 percent to 493.1 in the week ended July 3. Purchase applications rose 6.7 percent while requests to refinance gained 15 percent.

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