Following the Federal Reserve’s announcement to further reduce borrowing costs, mortgage rates in the US have fallen to a record low.
According to data from Freddie Mac, the average rate for a 30-year fixed mortgage fell to 4.01 percent from 4.09 percent in the week ended yesterday, the lowest mortgage rate witnessed by Virginia-based McLean since records began in 1971.
The average rate for a 15-year mortgage declined from 3.29 percent last week to 3.28 percent this week.
“Mortgage rates have fallen some ways already, but they probably haven’t fully caught up with the decline in the 10-year Treasury,” said Paul Dales, Senior US economist at Capital Economics Ltd in Toronto.
“It’s possible the effects of Operation Twist will drag 10-year yields down further, thereby weighing on mortgage rates more.”
Yields on 10-year Treasuries dropped to their lowest level in over 50 years, after the central bank announced on 21 September that it would launch a programme aimed at lowering mortgage rates and boosting the economy.
Called Operation Twist, this initiative was meant to replace shorter-term securities in the Federal Reserve’s portfolio with longer-term debt.
In addition, policy makers plan to support the mortgage market by reinvesting maturing housing debt into mortgage-backed securities.
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