Mortgage rates dipped again this week as investors bought into the notion that the Federal Reserve is ready to provide more economic stimulus to lift the economy.
The benchmark 30-year fixed-rate mortgage fell to 3.79% from 3.8%, according to the Bankrate.com national survey of large lenders. The mortgages in this week's survey had an average total of 0.4 discount and origination points. One year ago, the mortgage index stood at 4.35%; four weeks ago, it was 3.81%.
The benchmark 15-year fixed-rate mortgage rose to 3.04% from 3.03%. The benchmark 5/1 adjustable-rate mortgage fell to 2.76% from 2.8%.
Weekly national mortgage survey
Results of Bankrate.com's Sept. 5, 2012, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan:
30-year fixed 15-year fixed 5-year ARM
This week's rate: 3.79% 3.04% 2.76%
Change from last week: -0.01 +0.01 -0.04
Monthly payment: $767.89 $1,142.64 $674.47
Change from last week: -$0.94 +$0.80 -$3.51
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Fed talks, rates drop
There's no question Federal Reserve Chairman Ben Bernanke helped mortgage rates during his speech Friday in Jackson Hole, Wyo.
He did not provide any details about another round of stimulus at the event, but one vague statement was enough to fuel rumors that another bond-buying program is on the way.
"Taking due account of the uncertainties and limits of its policy tools, the Federal Reserve will provide additional policy accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability," Bernanke said.
After the speech, the yields on U.S. Treasury and mortgage bonds tumbled as the demand for these safer investments rose, says Bob Moulton, president of Americana Mortgage in Manhasset, N.Y.
"The fact that they are talking about another stimulus plan tells you that things are not as rosy as the government would like you to think," he says.
ECB might reverse the low-rate trend
Borrowers who have not taken advantage of the historically low rates and are able to do so now should not assume the low rates will last until the U.S. economy recovers, says Cameron Findlay, director at Discover Financial Services.
Several other factors can influence mortgage rates in the United States, including the global economy. The European debt crisis has been one of the main contributors to the low rates in the United States, says Brett Sinnott of CMG Mortgage Group in San Ramon, Calif. But the European situation might change at any moment.
European Central Bank President Mario Draghi has been pushing for a bond-buying program to reduce borrowing costs in Europe and help ease the debt crisis. The ECB meets this week, and if European leaders announce a plan that makes investors feel that the euro crisis is under control, mortgage rates in the United States might increase slightly in coming days, mortgage analysts say.
Mortgage rates could rise because, in a more secure economic environment, investors tend to dump safer investments such as U.S. bonds to go after riskier investments. When the demand for U.S. bonds declines, interest rates normally rise.
"The ECB is expected to propose unlimited bond buying tomorrow with a focus on government debt of up to three years," Sinnott says. "One would expect a stock rally, as many have been waiting for ECB action."
But if investors interpret the ECB's plan as a "sign of weakness," they will seek investments in the United States, and that will continue to help mortgage rates, he says.
Will borrowers say goodbye to low rates after the election?
Most mortgage analysts agree that regardless of what the Fed or the ECB does, mortgage rates will not move drastically until after the presidential election. After Nov. 6, anything could happen, Findlay says.
Adding to the uncertainty is a series of new mortgage regulations expected to be announced a week or two after the election. Depending on the final language of some of the proposed rules, lenders may increase rates for buyers with small down payments and homeowners with little equity, Findlay says.
"My view is consumers (who want to refinance or buy a home) are in a very tight window between now and the second week of November," he says, adding that there are a lot of question marks after that.