December 18, 2008
When it cut the Federal Funds Rate to nearly zero Tuesday, the Federal Reserve was hoping to push home mortgage rates to record low levels. It seems to be working, at least so far.
According to Freddie Mac's Primary Mortgage Market Survey, released weekly, the national average interest rate on a 30-year fixed rate mortgage was 5.19 percent for the week ending December 18. That's down from 5.47 percent the week before and the lowest level since the survey began in 1971.
A year ago the average mortgage rate was 6.14 percent, still consider low by historical standards.
Meanwhile, the average rate on a 15-year fixed-rate mortgage slipped below five percent, to 4.92 percent. It was 5.2 percent the week before.
"The decline in 30-year fixed-rate mortgages was supported by the Federal Reserve announcement on Dec. 16, when it cut the federal funds target to a record low and stated it stood ready to expand its purchases of mortgage-related assets as conditions warrant," said Frank Nothaft, Freddie Mac vice president and chief economist.
While the plunging interest rates are very good news for people with strong credit ratings, they're of less help to the people who really need it — those struggling to keep up with unaffordable payments.
Many of them will not qualify for the lowest rates because of their credit ratings. Even if they could, they might not be able to refinance their homes, since many are now worth less than that they owe.
