Why Rates are Down!

Mortgage rates fall to 37-year low
Rates on a 30-year fixed mortgage dropped to 5.19% this week, after the Fed slashed interest rates to historic lows.

By Lara Moscrip, CNNMoney.com contributing writer
Last Updated: December 18, 2008: 11:27 AM ET

NEW YORK (CNNMoney.com) -- Mortgage rates fell this week, with the 30-year fixed mortgage sinking to its lowest rate in 37 years as the Federal Reserve cut interest rates to historic lows.
Government-sponsored mortgage lender Freddie Mac (FRE, Fortune 500) said Thursday that fixed rates on 30-year mortgages averaged 5.19% for the week ending Dec. 18. That's down from 5.47% last week and below the year-ago rate of 6.14%.
"Interest rates for 30-year fixed-rate mortgage rates fell for the seventh consecutive week, moving these rates to the lowest since the survey began in April 1971," said Frank Nothaft, Freddie Mac vice president and chief economist.
"The decline was supported by the Federal Reserve announcement on December 16th, 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."
In a bid to reduce interest rates and to stabilize the housing market, the government in late November announced a plan to buy $500 billion worth of mortgage-backed securities and $100 billion of debt issued by government-sponsored mortgage financiers Fannie Mae (FNM, Fortune 500) and Freddie Mac.
The 15-year fixed rate mortgage this week fell to its lowest rate in four and a half years. It averaged 4.92%, down from 5.20% last week. A year ago at this time, a 15-year fixed rate loan averaged 5.79%.
Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARM) averaged 5.60% this week, down from last week when it averaged 5.82%. At this time a year ago, the 5-year ARM averaged 5.90%.
And the one-year Treasury-indexed ARM averaged 4.94% this week, down from last week when it averaged 5.09%. Last year, the 1-year ARM averaged 5.51%.

First Published: December 18, 2008: 11:16 AM ET