Mortgage rates, applications fall back
CHICAGO - Mortgage rates in the United States fell this week, easing concern that a Federal Reserve plan to lower the cost of home loans had lost momentum.
The average 30-year rate dropped to 5.32 percent from 5.42 percent, mortgage buyer Freddie Mac of McLean, Va., said yesterday. The 15-year rate was 4.77 percent.
“We’re back to where we were a month ago,’’ said Donald Rissmiller, chief economist at New York’s Strategas Research Partners. “This is almost an ideal report given that rates aren’t moving much in either direction and if you’re a policy maker, you’ll take that for now.’’
Fed chairman Ben S. Bernanke is trying to lower borrowing costs with a $1.25 trillion program to purchase securities backed by home loans. He’s trying to combat the almost four-year housing slump that contributed to the global credit crunch and cost the world’s financial firms almost $1.5 trillion, according to data compiled by Bloomberg.
The Fed last week left the size of its buying program intact and kept the benchmark rate for federal funds at between zero and 0.25 percent.
Mortgage rates reached a record low 4.78 percent twice in April after the central bank disclosed its plan to boost buying of both mortgage securities and Treasuries.
Those purchases brought down yields on government debt and mortgage-backed bonds issued by Fannie Mae, Freddie Mac, and Ginnie Mae, allowing lenders to reduce rates on new loans and still sell the securities at a profit.
Mortgage rates started climbing in May along with Treasury yields as investors became concerned that more government debt being sold to fund federal spending would fuel inflation.
Mortgage applications fell last week by the most since February. Purchase applications declined 4.5 percent while requests to refinance fell 30 percent.
