Buyers Are Acting While Rates are Low

Mortgage Rates Dip Below 5% – But They are Expected to Rise

The average rate on a 30-year, fixed-rate mortgage was down to 4.97% according to Freddie Mac’s latest weekly market survey. The average fees & points were 0.7% on that loan type. Rates have been pretty steady so far in 2010, but this week’s results were the lowest of the year.

The stability of rates has been created in large part by the Federal Reserve. At the beginning of 2009, it embarked on a program to purchase $1.25 trillion of mortgage-backed securities (MBS). By making a market, the Fed was helping to keep rates low and stabilize the housing market.

Homebuyers have indeed enjoyed the lowest mortgage rates since Freddie Mac started tracking rates in 1971. However, the Fed’s MBS program is coming to an end next month. Without that support, market watchers believe that rates will gradually rise through the first quarter and balance of 2010. It remains to be seen how high rates will move once the stimulus is removed. Many expect rates to remain below 6%, however.

The expiration of the MBS program means that two big deadlines for homebuyers are approaching. The homebuyer tax credits expire on April 30, 2010. Both of these programs have had an impact on housing sales.

With the end of these stimulus programs in sight a lot of buyers are out shopping right now. Last month, pending home sales logged the third best January on record.

For more on mortgage markets visit: http://www.freddiemac.com/pmms/#Historical.

To view more on the Fed’s MBS program and how it impacts the mortgage market, watch the video below.