Mortgage rates fell this week, setting or matching modern record lows.
The benchmark 30-year fixed-rate mortgage fell 9 basis points this week, to 4.42%, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.37 discount and origination points. One year ago, the mortgage index was 5.35%; four weeks ago, it was 4.45%.
At 4.42%, the 30-year fixed matched a record low in the 25-year history of Bankrate's weekly survey. It equaled a record low set two weeks ago. Rates haven't been lower since March 1953, according to the National Bureau of Economic Research's statistics on FHA-insured loans.
The benchmark 15-year fixed-rate mortgage fell 9 basis points, to 3.81%. The benchmark 5/1 adjustable-rate mortgage fell 10 basis points, to 3.57%, and the 30-year, fixed-rate jumbo fell 6 basis points, to 5.04%. All of those are record lows in Bankrate's weekly survey.
Shortly after Bankrate's survey was completed, the Federal Reserve announced an initiative to stimulate the economy by buying Treasury securities from banks. Within minutes, some mortgage lenders increased their rates or adjusted their discount points in a direction unfavorable to borrowers. Then, they promptly fell, and ended up where they had been before the Fed's announcement.
This week was full of suspense, with the midterm elections Tuesday and the Fed's pivotal announcement on Wednesday afternoon. The uncertainty is expected to continue through Friday morning, when the Labor Department will release the employment report for October.
The election results, the Fed's stimulus policy and the jobs report all had the potential to affect mortgage rates in unpredictable ways, both short-term and long-term. It brings up the question of what a prospective borrower should do when faced with a series of influential events. Is it better to lock a mortgage rate in case rates rise, or is it preferable to float, in case rates fall?
"Lock," says Jim Svinth, executive vice president of capital markets for mortgage lender loanDepot.com. "What I always say is lock today. At least get that in. If we see another big move, with rates coming down .25% or .5%, you can refinance again. It's not unheard of."
The fly in that ointment is that it's often a frustrating, drawn-out experience to refinance nowadays. The Fed's second round of "quantitative easing" could force mortgage rates even lower. But falling rates won't do much good if homeowners continue to confront roadblocks when they try to refinance.
Bankers blame government-controlled Fannie Mae and Freddie Mac, which impose extraordinarily stringent underwriting standards on mortgage lenders.
One part of the government -- the Fed -- is trying to encourage homeowners to refinance, while another part of the government -- the Federal Housing Finance Agency, which oversees Fannie and Freddie -- is making it difficult for homeowners to refi.