$750B From Federal Reserve = Mortgage Rates Dropping To Historic Lows Again?

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The market news from yesterday was that the Federal Reserve announced that it would buy $300 billion of long-term Treasury bonds, along with an addition $750 billion in mortgage-backed securities. My mortgage broker sent out a corresponding e-mail stating that he expected mortgage rates to drop somewhere around 3/8 to 1/2 points on conforming 30-year fixed mortgages.

The wholesale mortgage rate on a 30-year fixed loan with zero points, a 740+ FICO score and 20% down-payment was about 4.7% recently. The average rate from Bankrate was 5.29%, with an average total of 0.33 points. I don’t recall the exact numbers, but that sounds pretty close to the best rates I saw a few months ago.

If you’re shopping for a mortgage right now, or maybe you have even already locked in your rate, it may be a good idea to see what’s up. I recently shaved off $150 a month off my mortgage payment permanently with a loan modification (not federally subsidized) after researching refinance options. Don’t forget the current $8,000 first-time homebuyer tax credit as well.

For the interested, here is my collection of posts about my home-buying experience.

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  1. Captain Betty says

    yep… the fed’s printing money like it’s going out of style: http://www.iht.com/articles/2009/03/18/business/fed.php

  2. We’re buying our first house right now so this hit at a great time. All of a sudden all of the banks starting calling yesterday saying “the rates dropped!” but in the end, as expected, Wells Fargo beat them all with the lowest rate, lowest points, and lowest fees. Basically by locking in yesterday rather than the day before we saved $2000. Ridiculous.

  3. @ SCOTT

    You saved $2000 on what? Closing costs, interest on the life of the mortgage? Sorry not a home-onwer so maybe I’m missing your statement.

    Also, what is the home value you are purchasing, and how much have you put down? What area of the country are you in?

    I’m curious as I would be in the market to be a homebuyer in a few years and curious about others experiences

    In NY it is nearly impossible to purchase a home on a median income and one income household. The mortgage might be reasonable but you’ll be paying insane amounts of interest on the yearly taxes if you roll them into your mortgage payment. Than throw in the cost of living here and cable,phone,ultilities and groceries and you’re left having no life and sitting home all the time and paying bills.

    Buying a home in NY is unreasonable for the average 25-35 year old, and only for the high income earners. Im debating if homeownership is the quality of life I need right now.

  4. Greg Phillips says

    The rates should continue to decline as the money is distributed. Today my rates decreased .25% to .50% on most products.

  5. I did a refi 2 months ago at 5%… thought that was doing great.
    Maybe I should have held out. Hindsight is 20/20.
    Cut the 25 yrs I had left on a 30 yr down to 20 yr, with a slightly lower payment.
    Still happy with what I got… although I guess I could have been happier.

  6. The real question is why is your mortgage broker still in business? They provide no real value, they work for themselves and not you, so why use them? The housing culture is changing in California, you may have needed a broker to buy some overly exotic complex product in the past to get into an unsustainable inflated house but now you can only get a plain mortgage.

  7. Finally the rates are dropping! This came at a really good time too. Here’s to hoping they fall even more! I think I’m going to refianance in about a month or two. What do you guys think, do it now before the rates go up again or wait for them to fall even further?

  8. great, that means housing prices are inflated at artificially high prices due to temporary government gimmicks.

  9. Tom Lutzenberger says

    Close but not low enough yet. I’d like to see it get below 4.5% before I think refi. Very comfortably at 5.375% myself.


  10. Was going to lock 2 days ago at 5%. Waited and got 4.75% yesterday. Very happy about this!

  11. VicfromATL says

    Hi Jonathan..and other readers,

    I currently have 15 yr for 5.125% for last 3 yrs. My broker told me that it would make sense for me to refinance @ 4.25 -15 yr..I’m planning to stay in the same house for another 4-5 yrs.
    I’m also looking at refinacing to 30 yr if the rate is around 4.5. But I like the idea of paying more principal and lower rate with 15 yr.

    But I want to be a better investor instead of just being emotional.

    Can you please advise? or through some scenarios.



  12. it would be a good idea to refinance to 4.25 if you can.
    But i wouldn’t convert it to a 30 year mortgage. you would
    end up paying more interest than principal, especially were you are only planing on living there another 4-5 years.

    you could actually ask to see with the lower interest
    what would the payment be on a 10 year instead of 15.
    you might be able to pay the mortgage down even faster.

  13. Dean, that’s a good point we should all keep in mind. There was a bubble possibly caused or helped by lack of good regulation and right now the government is trying to soften the landing of the bubble with money policy. At some point, they have to allow regulation and not continue to pump money at which point house prices will have to come down/level off/not raise so much.

    It makes the long term investment perspective uncertain.

  14. I’m purchasing my first home and will be utilizing the 8K New HomeBuyers Credit….Just locked in my rate with USAA Federal Savings Bank at 4.875% and .125 points. No Origination Fee. I know in previous posts readers have said that Navy Federal Credit Union is the lowest they’ve been able to find, but Navy Federal Credit Union has a 1% origination fee, which you can waive for an additional .25% added to your interest rate. I’ve been following a lot of lenders recently, and USAA was by far the lowest. Happy Hunting other Home Buyers!

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