The government purchases of mortgage securities that began this week appear to be paying off, according to Bloomberg News, which reports that several of the largest U.S. banks have begun offering home loans at fixed rates of 5 percent or less.
For borrowers with excellent credit ratings and a down payment of 20 percent or more, JPMorgan Chase & Co. (NYSE: JPM) is advertising 30-year mortgages as low as 4.75 percent on its Web site, while Wells Fargo & Co. (NYSE: WFC) is offering rates as low as 4.875 percent and Bank of America Corp. (NYSE: BAC) is offering 5 percent. Meanwhile, BankRate.com today reported that its survey of large lenders found the average rate on a 30-year fixed mortgage has fallen to 5.33 percent this week from 5.64 percent a week ago.
A new report on rates is due today from Freddie Mac (NYSE: FRE) – the McLean, Va.-based mortgage giant that, with fellow government-sponsored enterprise Fannie Mae (NYSE: FNM), was taken over this fall as their bad-mortgage debt mounted – which last week posted a 30-year fixed mortgage rate of 5.1 percent, its lowest ever.
The Federal Reserve has been authorized to buy $500 billion in mortgage securities backed by Fannie Mae, Freddie Mac and Ginnie Mae (the Government National Mortgage Association) – and another $100 billion in direct debt as part of the government effort to unfreeze the credit markets and revive the economy.
But experts fear the lower mortgage rates may not be enough to lure buyers back to the housing market. “I don’t know if there is a magic number, now that everyone is freaking out about the economy,” Paul Miller, a mortgage-industry analyst with Friedman Billings Ramsey & Co. in Arlington, Va., told Bloomberg News. “The home buyer is scared out of the market.”
Information about the Federal Reserve System’s mortgage-security purchase plan is available at www.FederalReserve.gov. Additional information about the U.S. Emergency Economic Stabilization Act of 2008 (EESA) and the administration’s efforts to stabilize the financial markets is available at a multiagency site called EconomicRecovery.gov.
