Mortgage Trends This Week: Nov. 8

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How did mortgage rates react to the Federal Reserve’s announcement last week to pump $600 billion into the U.S. bond market? Pretty much as expected.

Rates were down across the board, with a few exceptions – for example, three-year adjustable rate mortgages rose from 3.647% to 3.753%, as measured by the BankingMyWay Weekly Mortgage Rate tracker. That jump looks like an aberration, as just about every other major mortgage rate category fell like a stone (more on that in a moment).

The Fed is heavily invested in keeping interest rates down, thus the $600 billion to flood the bond market. It’s a move that should raise bond prices, reduce mortgage rates, and hopefully encourage businesses and consumers to borrow some dough and start spending it.

One encouraging trend from last week is that the Department of Labor reported that 151,000 jobs were added to the employment rolls for the month of October. Perhaps more encouraging is that private sector jobs rose substantially while government jobs were reduced, raising hopes that a more classic economic rebound is on the horizon.

But that’s pretty much it for the good news. In a statement released after its Nov. 3 announcement about the $600 cash infusion into the bond market, the Federal Reserve admitted that economic growth “continues to be slow,” while income growth remains “modest.”

“To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities,” the Fed announced. “The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month.”

The Federal Reserve’s Open Markets Committee also said it would keep its key Fed Funds Rate at 0.0%-0.25%. That cements the short-term future for mortgage rates, a downward trend that should please homebuyers with good credit, but surely displease bank rate investors who almost certainly can expect bank yields to remain low.

In a Nov. 4 op-ed in The Washington Post, Federal Reserve Chairman Ben Bernanke said that the move is necessary for economic growth and that mortgage consumers should be the chief beneficiaries.

"This approach eased financial conditions in the past and, so far, looks to be effective again,” he wrote. “Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance.”

The housing market could sure use a boost. According to the National Association of Realtors, pending home sales fell back (by 1.8%) after two months of upward growth. The NAR index still is down 24.9% from Sept. 2009, at the apex of the new homebuyer’s tax credit.

That’s the “big picture” update for now. Let’s take a look at where mortgage rates are today.

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Description                             This Week                   Last Week

One Year ARM                       3.629%                        3.583%
Three Year ARM                     3.753%                        3.647%
Five Year ARM                       3.277%                        3.555%
15 Year Mortgage                    3.810%                        3.919%
30 Year Mortgage                    4.333%                        4.498%

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Sure, it’s unusual to be house hunting on the cusp of the holiday season, but a deal is a deal, and the future is now when it comes to mortgage rates. That’s where the BankingMyWay’s Mortgage Rate Search can help. Week to week, it’s your best bet for finding the best mortgage rate deal possible.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

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