Interest Rates On 30-Year Fixed Mortgage Loans Down For 10th Straight Week

Washington, D.C. (AHN) - A recent Freddie Mac poll showed that average mortgage rate in the U.S. has gone down to 5 percent, its lowest level in decades. It was the 10th straight week that the mortgage lending rates on 30-year fixed loans declined.

The figure indicates the Federal Reserve's plan to encourage lenders to bring down their mortgage rates is effective. It covers the week ending Jan. 8.

Last week, the average rate was 5.1 percent and 5.87 percent 12 months ago. Mortgage rates peaked at 6.7 percent last summer.

What pushed the rates down was an announcement by the Fed in late November that it would purchase back $500 billion mortgage-backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae. On Monday the Fed started to buy mortgage-backed securities. As of Wednesday the Fed had bought $10.21 billion.

Orawin Velz, vice president for economic forecasting of the Mortgage Bankers Association, said, quoted by the New York Times, "Since the Fed announced they would buy mortgage-backed securities, we have seen a pretty healthy increase in refinance applications, while purchase applications have trended up, but not as significantly."

Meanwhile, Treasury Sec. Henry Paulson Jr., in his last speech, proposed to members of the Economic Club of Washington that Fannie Mae and Freddie Mac be replaced with highly-regulated utilities. The new firms would have a more limited role in making money available for home loans.

Paulson steps down Jan. 20, after serving as Treasury Secretary for 2.5 years.