Washington, Washington D.c. (PressExposure) April 04, 2009 -- Freddie Mac just announced in a statement that the 30-year fixed mortgage rate in the U.S. dropped to 4.78% from 4.85% a week earlier, making it the lowest rate since1971 when record-keeping began.
This was the second record low in two consecutive weeks, perhaps signaling that Federal Reserve Chairman Ben Bernanke's efforts to stimulate the housing market are finally having an effect.
The Federal Reserve has been increasing its purchases of mortgage-backed bonds to support home lending, and Bernanke said in a March 20 speech to a Phoenix banking conference, "The Fed's efforts to expand lending should make new consumer, business, and mortgage loans more available, at lower cost. Government purchases of mortgage securities are helping to reduce the interest rates that Fannie Mae and Freddie Mac buyers require on home loans thereby lowering the rate at which lenders, including community banks, can fund new mortgages".
Getting a loan however, has become even more difficult because lenders have raised the qualifying-bar, and Grant Stern, who is the president of Morningside Mortgage Corp. said, "Obtaining financing even with low mortgage rates is difficult. Consumers with 25% down payments and credit scores of 680 or higher can get a 30-year fixed-rate as low as 4.5%. It's difficult for would-be homebuyers with credit scores below 620 out of a possible 850 to obtain a mortgage. It's very tough".
How low the rates will fall is anyone's guess, but Scott Anderson, who is a senior economist at Wells Fargo & Co. in Minneapolis said, "We're not going to see mortgage rates a lot lower than they are today. It's going to be a lot harder to push rates lower from here", and Celia Chen, who is senior director at Moody's Economy.com said, "The 30-year fixed mortgage rate may bottom at 4.4%. Lower rates will help increase demand for homes. We need to see stronger demand for homes to help end the housing correction".
According to a report by the National Association of Realtors, "falling mortgage rates and lower prices have lifted demand for U.S. homes and the number of Americans signing contracts to buy previously owned homes rose 2.1% in February and the index of signed purchase agreements, or pending home re-sales, rose to 82.1 from 80.4 in January".